The EUR broke through the 1.31 price level in early Asian session trading and continues to hover above that level. Technical and fundamental factors have taken a back seat as the market is waiting on Ben Bernanke. The Federal Reserve Chairman, rumoured to be stepping down at the end of the year, will address the house of representatives on Wednesday and the US senate on the following day. Given the reaction markets have had towards the Fed’s leader comments, you can expect some volatility before and after the statement.
The International Monetary Fund outlined the three biggest risks to global growth last week. China, Abenomics and US Fed QE exit strategy. Yesterday China GDP growth figures were disappointing which will hit global forecasts as more economies depend on the Asian juggernaut recovering its impressive growth rate. Abenomics is hitting a rough patch as there are a lot of question marks around the feasibility of success of the strategies put in place by PM Abe and BoJ Governor Kuroda.
Which leaves us with the Fed tapering strategy.There was a lot of criticism aimed at both the timing of the move and the way it was communicated. A quick Fed QE timeline would be as follows:
- First Bernanke hinted at the end of QE during the June 19th FOMC statement.
- The following week Fed members contradicted, or as they called it clarified the Bernanke statement.
- Employment is front and center in the QE exit strategy, so when NFP came in higher than expected on July 5th the markets sold the EUR.
- On July 10th the Fed’s FOMC minutes came out and showed there was an internal division within the members.
This back and forth and clarification has made trading the EUR/USD a volatile proposition. The European political landscape has complicated matters for the single currency with Portugal clinging to a coalition, Italy facing a disintegration of their coalition and Luxembourg of all places possibly facing a snap election due to a spying scandal.
EUR/USD Pivot Points
EUR/USD Fundamentals for July 16th, 2013
- 12:30 US Core CPI. Estimate 0.2%.
- 12:30 US CPI. Estimate 0.3%.
- 13:00 US TIC Long-Term Purchases. Estimate 14.3B.
- 13:15 US Capacity Utilization Rate. Estimate 77.8%.
- 13:15 US Industrial Production. Estimate 0.2%.
- 14:00 US NAHB Housing Market Index. Estimate 51 points.
- 18:15 US FOMC Member Esther George Speaks.
Key releases are highlighted in bold
All release times are GMT