EUR/USD – Jumps as US Numbers Disappoint

EUR/USD is back on the move, gaining over one cent against the US dollar on Tuesday, gaining over one cent. Economic Sentiment numbers out of the Eurozone were weak, and US data also disappointed the markets. On Wednesday, German 10-year bonds, the only Eurozone release,  posted a yield of 1.28%. This was slightly below the previous yield of 1.36%. In the US, today’s highlight is Crude Oil Inventories.

The euro posted strong gains on Tuesday, as the pair shrugged off dismal data out of Germany and the Eurozone. German ZEW Economic Sentiment, a key indicator plunged, dropping from 48.5 points to 36.3 points. The estimate stood at 41.5 points. Eurozone ZEW Economic Sentiment also looked weak, falling from 33.4 points to 24.9 points. This was well below the estimate of 31.5 points. In the US, the picture wasn’t much better as key data continues to fall below expectations. Building Permits dropped from 0.95 million to 0.90 million, missing the forecast of 0.94 million. Core CPI posted a weak gain of 0.1%, falling below the estimate of 0.2%. There was better news from US Housing Starts, which hit a multi-year high, improving to 1.04 million. The estimate stood at 0.93 million. The US has hit a prolonged streak of weak numbers, and this is bound to raise red flags in the markets about the extent of the US recovery.

The Cyprus bailout may not be in the headlines lately, but the crisis is by no means behind us. Last month, the EU and IMF agreed to provide EUR 10 billion, with Cyprus kicking in another EUR 7 billion. However, the original deal collapsed after Cyprus balked at taxing every bank deposit in the country, following a huge outcry on the island. The bailout has now ballooned to EUR 23 billion, with Cyprus agreeing to pay EUR 13 billion. The country plans to raise these funds through a combination of taxes on uninsured depositors, tax rises and spending cuts. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while those in Laiki Bank, which will be winded down, could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will be slashed by 13% in 2013 and 2014, which promises to be a serious challenge to the Cypriot economy.

In Italy, not much has happened since the inconclusive election back in February. Coalition negotiations between the parties have gone nowhere. Mario Monti remains head of a caretaker government, which is little more than a lame duck, unable to continue with economic reforms. Monti and center-left leader Pier Luigi Bersani are close to an agreement to choose a successor to President Giorgio Napolitano, who will step down in mid-May. The crisis in the Eurozone’s third largest economy threatens to undermine the Eurozone, and the markets are hoping that the choosing of a new president will be the first step in the formation of a new government.

EUR/USD for Wednesday, April 17, 2013

1.3176 H: 1.3199 L: 1.3153

EUR/USD Technical

EUR/USD has settled down after Tuesday’s strong gains. On the downside, the pair is testing 1.3170. This line was breached earlier today. There is stronger support at the round number of 1.31. On the downside, the pair is facing resistance at 1.3240. This is followed by a resistance line at 1.3350. 

Current range: 1.3170 to 1.3240.

Further levels in both directions:

• Below: 1.3170, 1.31, 1.3050, 1.30 and 1.2960
• Above: 1.3240, 1.3350, 1.34 and 1.3479

OANDA’s Open Position Ratios

The EUR/USD ratio is showing little movement in Tuesday trading. This is consistent with what we are seeing from the pair, which is trading quietly in the high-1.31 range. An increase in activity in the ratio could indicate that we can expect more movement from the pair. The ratio is mostly made up of short positions, indicating a strong bias that the dollar will make inroads against the euro.

After sharp gains on Tuesday, EUR/USD has settled down. There is little in the way of fundamental releases on Wednesday, so we can expect a fairly quiet day from the pair.

• 9:33: German 10-year Bond Auction. Actual 1.28%.
• 13:30 US FOMC Member James Bullard Speaks
• 14:30 US Crude Oil Inventories. Estimate 1.2M
• 16:00 US FOMC Member Eric Rosengren Speaks
• 18:00 US Beige Book
• 20:00 US Treasury Secretary Jack Lew Speaks

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.