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EUR/USD – Euro Continues to Point Upwards

EUR/USD continues to look strong as we begin the new trading week. The pair has moved higher on Monday and is trading in the mid-1.37 range. In economic news, there are only three releases on Monday. Eurozone Retail PMI came in at 47.7 points, pointing to continuing contraction in the retail sector. There was little change on the yield from Italian 10-year bonds, which came in 4.11%. Over in the US, today’s sole event is Pending Home Sales. The markets are expecting a strong gain after a string of declines.

A quiet holiday week hasn’t stopped the euro from continuing to post gains against the US dollar. Low liquidity over a holiday period can lead to strong currency movements, and we got a taste of that on Friday. The euro shot up about 200 points as it hit a high of 1.3896. However, it then retracted and closed in the mid-1.37 range. As well, the recent Fed taper decision has fuelled a “risk on” atmosphere which has led to increased selling of the safe-haven US dollar and boosted the euro. With thin trade likely this week as well due to the holidays, we could see further volatility from EUR/USD.

Late last week, Unemployment Claims bounced back nicely following two disappointing releases. The key employment indicator fell to 338 thousand, compared to 379 thousand in the previous release. The estimate stood at 346 thousand. With the Federal Reserve poised to begin its long-awaited QE taper next month, employment releases have taken on added significance. If the US labor market continues to improve, the Fed could decide on another taper early in 2014, which would give a boost to the US dollar against its major rivals.

There was some holiday cheer from US releases last week, as manufacturing and housing numbers pointed upwards. Core Durable Goods Orders posted a strong gain of 1.2%, its best showing since April. The key manufacturing indicator had posted four consecutive declines, so the sharp gain was welcome news. Durable Goods Orders bounced back from a sharp decline in October with a gain of 3.5%, well above the estimate of 1.7%. New Homes Sales also impressed with a five-month high, climbing to 464 thousand. The estimate stood at 449 thousand.

With all the bad news about Eurozone bailouts for struggling members, there was a happier episode as Ireland recently exited the bailout program it had received from the EU and the IMF. Ireland had been party to the bailout for three years, and will now be able to borrow money on the international markets. Key sectors such as tourism and agriculture are improving, and unemployment is down to about 12.5%. However, economic growth is expected to be limited, as the country was forced to undergo drastic budget cuts and tax increases as part of the bailout. Finance Minister Michael Noonan has said the exit from the bailout is a step in the right direction, but admits that the road to recovery will be a long one.

 

EUR/USD for Monday, December 30, 2013

Forex Rate Graph 21/1/13

EUR/USD December 30 at 11:20 GMT

EUR/USD 1.3770 H: 1.3776 L: 1.3729

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3500 1.3585 1.3649 1.3786 1.3893 1.4000

 

Further levels in both directions:

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions in Monday trading. This is consistent with what we are seeing from the pair, as the euro continues to gain ground. The ratio is still made up largely of short positions, indicative of a trader bias towards the dollar reversing directions and moving to higher ground.

The euro rally continues, as the currency has gained about one cent against the dollar since Christmas. We could see some further movement during the North American session, as the US releases key housing data later on.

 

EUR/USD Fundamentals

 

*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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