EUR/USD – Edges Higher After Weak US Housing Numbers

EUR/USD edged higher on Tuesday, following the release of disappointing housing numbers out of the US on Monday. The pair pushed above the 1.32 line in the Asian session, but has since dipped below this line. It’s another quiet day as far as economic releases, with just three releases on schedule.

The week started on a sour note, as US Existing Home Sales did not impress. The key housing indicator dropped from 5.18 million to 5.08 million. Clearly, the markets were expecting too much, with an estimate of 5.27 million. The markets will be hoping for better news from New Home Sales on Wednesday. This indicator has now improved for the past three consecutive releases. The housing industry is a vital component of economic growth, and both of these housing releases are market-movers.

Tuesday has only a handful of releases, but the markets will be keeping an eye on the Richmond Manufacturing Index. Although this indicator is considered a minor release, traders should keep in mind that it can have an impact on the movement of the dollar, as it helps provide analysts with a snapshot of the health and direction of the US manufacturing sector. This indicator looked very sharp in the June reading, following two weak readings. Last week, the Empire State Manufacturing Index and Philly Fed Manufacturing Index looked sharp, easily beating their estimates. If the Richmond indicator can keep pace, it could signal that the manufacturing industry, which has been a sore spot in the US recovery, is on the right track, which would be bullish for the dollar.

The G20 wrapped up a meeting of finance ministers over the weekend in Moscow. Monetary policy was high on the agenda, as the delegates released a statement that future monetary policy moves would be “carefully calibrated and clearly communicated”. This is in response to the recent market turmoil we’ve experienced following statements out of the Federal Reserve with regard to QE tapering. The Fed has not always sounded consistent, and predictably, the resulting uncertainty led to all sorts of speculation and rocked the market. Leaders of the G20 will meet in St. Petersburg in September, and a final draft statement from the Moscow meeting said that a plan to increase jobs and growth and rebalance debt would be ready for the September meeting.

In Spain, a growing political crisis has made its way to the very top, potentially implicating Prime Minister Mariano Rajoy. The PM is accused of receiving illegal payments back in the 90’s, when he served as a minister. There have been calls for Rajoy’s resignation, but analysts have noted that resignations by Spanish political figures are rare, as it is not part of the Spanish political culture. Rajoy, who has denied any wrongdoing, has a strong majority in parliament and is not expected to step down. Meanwhile, the government has its hands full with a weak Spanish economy. The news was not good on Friday, as Spanish HPI posted another sharp decline, as the July release posted a sharp decline of -2.4%. The last time this housing inflation index posted a gain was back in 2008, indicative of a housing industry in deep trouble.

EUR/USD for Tuesday, July 23, 2013

EUR/USD 1.3186 H: 1.3208 L: 1.3184

EUR/USD Technical

EUR/USD edged higher in Tuesday’s Asian session, touching a high of 1.3208. The pair has retracted in the European session, and was trading around 1.3190. The pair continues to receive support at 1.3162. This is a weak line which saw action on Monday, and could face more pressure on Tuesday. The next support level is at the round number of 1.3100.

On the upside, the pair faces strong resistance at 1.3275. This line has held firm since mid-June, giving way when the euro was on a sharp downward spiral. This line is followed by a resistance line at 1.3400.

• Current range: 1.3162 to 1.3275

Further levels in both directions:

• Below: 1.3162, 1.3100, 1.3050, 1.3000, 1.2943 and 1.2844
• Above: 1.3275, 1.34, 1.3476 and 1.3585

OANDA’s Open Positions Ratio

EUR/USD ratio has taken a break, and is unchanged so far in Tuesday trading. This is reflected in the pair, with the pair showing little movement. A majority of the open positions are short, indicating that trader sentiment is biased towards the dollar posting gains at the expense of the euro.

The euro edged higher on Monday, and is keeping the 1.32 line busy, as the EUR/USD trades slightly below this level. There are only three minor releases on Tuesday, although the Richmond Manufacturing Index could shake things up if the reading surprises the markets.

EUR/USD Fundamentals

• 13:00 US HPI. Estimate 0.9%.
• 14:00 US Richmond Manufacturing Index. Estimate 7 points.
• 14:00 Eurozone Consumer Confidence. Estimate -18 points.

*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.