EUR/USD – Euro Edges Higher ahead of Fed Minutes

The euro is showing signs of recovery after the sharp losses we saw late last week. EUR/USD is trading in the mid-1.28 range in Tuesday’s European session. In economic news, German releases continue to look weak, as Trade Balance and Industrial Production both missed their estimates on Monday. There are no major releases from the Eurozone or the US on Tuesday, but the markets are waiting for the release of the minutes from the last Federal Reserve policy meeting, which will be released on Wednesday.

The US dollar is enjoying broad strength against the major currencies, thanks to a solid Non-Farm Payrolls release on Friday. The key indicator hit a four-month high, posting 200 thousand new jobs. This was well above the estimate of 163 thousand. Earlier in the week, Unemployment Claims came in just below the estimate. The unemployment rate was unchanged at 7.6%. There are two factors here which have contributed to the dollar’s strength. First, last week’s strong employment data points to an improving US economy. Second, there is increased likelihood that the Federal Reserve could taper QE, which would be a dollar-positive event.

The political crisis which gripped Portugal last week is over, at least according to Prime Minister Pedro Passos Coelho. The country has been struggling with austerity measures as part of its bailout program, and the government looked like it might fall after the the finance and foreign ministers tendered their resignations. Coelho said a deal had been reached with a junior coalition party, which would ensure that the government remains in power. There was concern in the Eurozone that the crisis could derail the 78 billion bailout agreement which Portugal received. The deal which would keep the government afloat is subject to the approval of Portugal’s president, Anibal Cavaco Silva. He continues to meet with the country’s political parties, and a decision is expected shortly.

Eurozone financial ministers met on Monday, and decided to release more bailout aid to Greece, but with a catch, as only part of the scheduled tranche of 8.1 billion euros will be transferred to Athens. Under the new arrangement, Greece will receive 3 billion euros in July and additional funds in August and October. The Eurogroup decision to give Greece only a portion of the funds currently reflects growing unease with the lack of progress by Athens in implementing the bailout conditions, including improved tax collection and cuts to the bloated public service. Greece has been put on notice that it will have to show more progress in economic restructuring before the troika releases more bailout funds.

EUR/USD for Tuesday, July 9, 2013

EUR/USD 1.2871 H: 1.2898 L: 1.2847

EUR/USD Technical

EUR/USD has edged higher on Tuesday as the euro moves higher. The pair continues to receive support at 1.2844. This is a weak line, and could face pressure if the pair reverses direction. This is followed by a strong support level at 1.2751. This line has held firm since early April . On the upside, the pair is facing resistance at 1.2943. This is followed by the important line of 1.3000.

• Current range: 1.2844 to 1.2943

Further levels in both directions:

• Below: 1.2844, 1.2751 and 1.2696 and 1.2586
• Above: 1.2943, 1.3000, 1.3050, 1.3100, 1.3162 and 1.3271

OANDA’s Open Positions Ratio

The EUR/USD ratio has reversed directions from Monday, and is now pointing to movement towards short positions on Tuesday. This is not consistent with what we are seeing from the pair, as the euro has edged higher. However, the movement in the ratio could be an early indication that the pair will reverse direction and head to lower levels.

EUR/USD has posted modest gains the week, in contrast to the sharp losses it sustained last week. Will the upward trend continue? With no major releases on Tuesday, we could see a quiet day. This will likely change on Wednesday, with the release of the minutes of the Federal Reserve’s most recent policy meeting.

EUR/USD Fundamentals

• 6:45 French Government Budget Balance. Actual -72.6B.
• All Day – ECOFIN Meetings.
• 11:30 US NFIB Small Business Index. Estimate 96.2 points.
• 14:00 US JOLTS Job Openings. Estimate 3.81M.

*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.