EUR/USD – Under Pressure Following Sharp Losses

EUR/USD remains under pressure after the pair dropped about 150 points on Wednesday (April 17th). The pair reacted negatively after a senior ECB official said that an interest rate cut was a possibility. On Thursday, there is only one release out of the Eurozone, as the yield on Spanish 10-year bonds rose slightly. In the US, the markets will be looking for positive news, as Unemployment Claims and the Philly Fed Manufacturing Index are released later today. In Washington, the G20 gathers on Thursday for a two-day meeting. In today’s European session, EUR/USD was trading in the mid-1.30 range.

The euro roller coaster continues. On Tuesday, EUR/USD was up sharply, gaining over one cent. The pair then coughed up these gains and then some on Wednesday, as the pair plummeted, losing around 150 points. The markets were not pleased by comments by ECB Governing Council member Jens Weidmann that the ECB could lower rates if economic and inflation data warranted such a move. Also weighing on the euro was the release of an IMF report which said that the Eurozone is the weakest part of the global economy, and urged the ECB to lower interest rates in order to boost economic growth. In the report, the IMF reduced its forecast of Eurozone growth in 2013 from 0.2% to -0.2%, and also cut its forecast of German growth from 0.9% to 0.6%.

In the US, the picture is not a pretty one, as a long streak of weak economic numbers, dating back to March, continues. 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 weak data points to trouble in the US economy, and if the streak continues, is bound to raise red flags in the markets about the extent of the US recovery. The markets will be hoping for better news on Thursday, as the US releases more key numbers.

In Italy, little progress has been made on the political front 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 Thursday, April 18, 2013

1.3057 H: 1.3074 L: 1.3021

EUR/USD Technical

EUR/USD has settled down after sharp losses on Wednesday. The pair is testing support at 1.3050, and we could see this line break if the euro loses more ground. The next support line is at the round number of 1.30. On the upside, 1.31 is providing resistance. This is followed by resistance at 1.3170. 

Current range: 1.3280 to 1.3350.

Further levels in both directions:

• Below: 1.3050, 1.30, 1.2960 and 1.2880
• Above: 1.31, 1.3170, 1.3240 and 1.3350

OANDA’s Open Position Ratios

We are seeing sharp movement in the EUR/USD ratio, in the direction of long positions. This is not reflected in the current movement of the pair, but could be an early indication that the euro will rebound from Wednesday’s steep drop. The ratio is now evenly split between long and short positions.

EUR/USD has taken a breather after some volatile trading. The pair could swing back into action later today, as the US releases key employment and manufacturing numbers.

EUR/USD Fundamentals

• Spanish 10-year Bond Auction. Actual 4.61%
• 12:30 US Unemployment Claims. Estimate 349K
• 14:00 US Philly Fed Manufacturing Index. Estimate 2.7 points
• 14:00 US CB Leading Index. Estimate 0.1%
• 14:30 US Natural Gas Storage. Estimate 35B
• Day 1: G20 Meetings
• 16:00 US FOMC Member Sarah Bloom Raskin 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.