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EUR/USD – Takes a Tumble as German PMIs Falter

After an uneventful start to the week, EUR/USD dropped sharply on Tuesday, dipping below the 1.30 level in the European session. The markets were not pleased as German manufacturing and service PMIs both missed their estimates. French and Eurozone PMIs, however, were within market expectations. In the US, today’s major release is New Home Sales. The markets will be hoping for an improvement after Existing Home Sales looked sluggish on Monday.

The euro took a hit in Tuesday trading, dropping sharply as German PMIs were well  below expectations. Manufacturing PMI dropped from 48.9 points to 47.9 points, its lowest level in 2013. This was well short of the estimate of 49.0 points. Services PMI was no better, falling from 51.6 points to 49.2 points. This was below the estimate of 51.1 points, and the first reading below 50 since last November. This reading is particularly worrisome, as reading below 50 signals contraction. French and Eurozone PMIs looked better, coming in above or close to the market estimates.  Spanish HPI continues to post declines, and dropped 0.8%. However, this was the smallest decline since 2011. The markets will be keeping a close eye on German Ifo Business Climate, a key event which will be released on Wednesday. If this indicator misses its estimate, we could see the euro lose ground.

In Italy, the political crisis in Italy continues, but at least there is some positive movement to report. Over the weekend, there were some dramatic developments, as President Giorgio Napolitano, who was supposed to be replaced, was reelected to a new 7-year term. As well, the leader of the center-left PD party, Pier Luigi Bersani, resigned after losing support within his party. Napolitano will attempt to break the logjam and help the parties put a coalition together. This could be the last opportunity before the country is forced to go to new elections. This would  result in more uncertainty and likely hurt the euro.

What’s wrong with the US? The country’s economic releases continue to disappoint the markets, as last week’s key releases fell below expectations. Last week, there was more bad news, as employment and manufacturing numbers missed the mark. Unemployment Claims came in at 352 thousand, higher than the estimate of 349 thousand. The Philly Fed Manufacturing Index dropped from 2.0 points to 1.3 points, nowhere near the estimate of 2.7 points. This week started no better, as Existing Home Sales came in at 492 million, well off the estimate of 5.02 million. The markets are hoping that Tuesday’s housing numbers can do better.


EUR/USD for Tuesday, April 23, 2013

Forex Rate Graph 21/1/13
EUR/USD January 23 at 10:00 GMT

1.2989 H: 1.3083 L: 1.2974


EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2777 1.2880 1.2960 1.3000 1.3050 1.3100


EUR/USD has dropped below the 1.30 line in the European session. The pair is receiving weak support at 1.2960. This line could  be tested during the day. There is a stronger support level at 1.2960. On the upside, 1.3000 is a weak resistance line. This is followed by 1.3050.



Further levels in both directions:


OANDA’s Open Position Ratios

The EUR/USD ratio is showing movement, with an increase in long positions. This is not reflected in the current movement of the pair, which has seen the euro drop sharply on Tuesday. However, it could be an early indication that we will see the pair reverse direction. The short positions continue to comprise a majority of the positions in the ratio.

After a quiet start to the week, EUR/USD is showing volatility, and has dropped below the 1.30 line. With the US releasing key housing data later today, we could continue to see movement from the pair.


*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.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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