EUR/USD – Euro Edges Higher As Spanish, Italian PMIs Point Higher

With the holiday season behind us, it’s back to work as the markets move into full gear. EUR/USD is steady in Monday trading, as the pair trades slightly above the 1.36 line in the European session. In economic news, both Spanish and Italian Services PMIs improved in December. In the US, today’s highlight is ISM Non-Manufacturing PMI. As well, the Senate holds a vote on the nomination of Janet Yellen for head of the Federal Reserve, which is expected to pass easily.

With a rickety economy and sky-high unemployment, Spain is often in the news for the wrong reasons, but Spanish releases have been a pleasant surprise early in 2014. There was more good news on Monday, as Spanish Services PMI jumped to an impressive 54.2 points, up from 51.2 points the month before. This was well above the estimate of 51.1 points. On Friday, Unemployment Change sparkled, dropping by 107.6 thousand, crushing the estimate of 24.3 thousand. This was the best reading ever in the month of December. Earlier in the week, Manufacturing PMI crossed above the 50-point level, indicating expansion. Spain may not be the next powerhouse in Europe, but the new year has started in great form for the Eurozone’s fourth largest economy.

US Unemployment Claims was almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand. The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP could impact on the next Fed decision regarding QE, after 2013 ended with QE tapering. While it was a small move, lowering asset purchases from $85 billion to $75 billion each month, the Fed did make a significant change its monetary policy, and this could have a significant positive impact on the US dollar. If US employment releases continue to look solid, we can expect further tapers in the near future, which could shake up the currency markets in favor of the US dollar.

A new year, a new member for the Eurozone. Latvia joined the bloc on January 1, becoming the 18th member of the club. With a population of just two million, Latvia will be one of the smallest economies in the Eurozone. Although many Latvians are not enthusiastic about adopting the continental currency, there were immediate benefits to the move, as the S&P and Fitch ratings agencies have raised the country’s credit rating in response to its joining the Eurozone and adopting the euro. There are now some 333 million people are now using the euro, which is the US dollar’s chief rival.

EUR/USD for Monday, January 6, 2014

EUR/USD January 6 at 12:00 GMT

EUR/USD 1.3603 H: 1.3621 L: 1.3572

EUR/USD Technical

• EUR/USD has posted slight gains in Monday trading. The pair dropped below the 1.36 line in the Asian session but has crossed back above it in European trading.
• 1.3585 is providing weak support. This is followed by a stronger line at the round number of 1.3500.
• 1.3649 has reverted to a resistance role. This is followed by resistance at 1.3786.
• Current range: 1.3585 to 1.3649

Further levels in both directions:

• Below: 1.3585, 1.3500, 1.3410 and 1.336
• Above: 1.3649, 1.3786, 1.3893, 1.4000 and 1.4140

OANDA’s Open Positions Ratio

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

The euro has started the week quietly, trading around the 1.36 line. With the US releasing a key PMI later in the day, we could see some stronger movement from the pair during the North American session.

EUR/USD Fundamentals

• All Day – German Preliminary CPI. Exp. 0.4%.
• 8:15 Spanish Services PMI. Estimate 51.1. Actual 54.2 points.
• 8:45 Italian Services PMI. Estimate 48.9 points. Actual 47.9 points.
• 9:00 Eurozone Final Services PMI. Estimate 48.9 points. Actual 47.9 points.
• 9:30 Eurozone Sentix Investor Confidence. Estimate 9.7 points. Actual 11.9 points.
• 14:00 US Final Services PMI. Exp. 56.0 points.
• 15:00 US ISM Non-Manufacturing PMI. Exp. 54.6 points.
• 15:00 US Factory Orders. Exp. 1.8%.
• 22:30 US Fed Chairman Nomination Vote.

*Key releases are highlighted in bold

*All release times are GMT

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