EUR/USD – Above 1.33 As Eurozone Recovery Outshines US Positive Data

The EUR/USD has broken above 1.33 during the middle of the trading day in America. The European data was mostly positive and had stronger hints of a recovery. German factory orders was a nice surprise to the upside. The orders jumped from an expected 1.1 percent to an actual of 3.8%. The market even found a way to find a positive in the Italian GDP figures as Italy contracted for 8th consecutive month, that could be signalling the end of EU recession. The past three months have shown a slower pace which could mean the light at the end of the tunnel Draghi hints at could be near.

US Trade balance shrank to 34.2 billion. A 22.4% drop in the monthly report. This is the smallest gap since October 2009. The market is still digesting the weaker employment numbers from last friday. A lower than expected NFP has put the momentum of the US recovery in question. That did not stopDallas Fed President Fisher to issue market-moving comments on the central bank’s strategy.

An insightful editorial by Pimco’s CEO Mohamed el-Erian puts the traditionally quiet month ofAugust as the start of the European holidays in perspective. Most of the decision makers in Europe will be on holiday and will be back for an action packed September. Germany will be business as usual as Chancellor Merkel has sewn up the elections with no change expected in leadership. The message from Europe leadership is that this time the recovery is palpable and while the threat is still active not so pressing. The liquidity in the market will be lower which could enhance the speed of some moves specially when dealing with policy statements and comments from policy makers.

On that topic earlier today European Central Bank policy maker Praet made some comments about the ECB not being out of ammunition. The statements is a response to Mario Draghi’s critics. Peter Praet wrote a column in which he wanted to be known that the central bank has plenty of options.

Forex Rate Graph 06/08/13

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3274 1.3279 1.3287 1.3300 1.3305 1.3313

EUR/USD has edged higher in Tuesday trading going above the 1.33 line in the American session. The 1.3313 resistance level is under threat in thin trading and lack of economic data in the US and Europe until Thursday could see the pair steady at this level. The weekly high came last week at 1.3345 which if the current upwards trend catches momentum could push for a break of the 30 day upper bollinger band of 1.3391.

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza