EUR/USD April 2 – Steady as Eurozone Numbers Mixed

EUR/USD is steady in Tuesday trading, as the pair trades in the low-1.28 range.  European markets are back in action after a break for the Easter holiday. In the US, ISM Manufacturing PMI started off the week on a sour note, as the key indicator fell well below expectations.  Spanish and Italian  PMIs were also a disappointment, missing their estimates. On the bright side, both Spain and Italy reported employment numbers which were better than expected. However, Eurozone Unemployment edged up to a dismal 12.0%. There are only three releases out of the US, with the most important one being Factory Orders.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar  moved as high as 1.2877, and consolidated at 1.2855. The pair has edged lower in the European session.
• Current range: 1.2805 to 1.2880

Further levels in both directions:  

• Below: 1.2805, 1.2746, 1.27, 1.2660 and 1.2587.
• Above:   1.2880, 1.2960, 1.3000, 1.3100, 1.3130 and 1.3170.
• 1.2805 is providing support to the pair. 1.2746 is stronger.
• 1.2880 is the next resistance line.

Euro opens the week steadily- click on the graph to enlarge.

EUR/USD Fundamentals

• All  Day:  German Preliminary CPI. Exp. 0.4%.
• 7:00 Spanish Unemployment Change. Exp. 30.2K. Actual -5.0K.
• 7:15 Spanish Manufacturing PMI. Exp. 46.2 points. Actual 44.2 points.
• 7:45 Italian Manufacturing PMI. Exp. 45.4 points. Actual 44.5 points.
• 8:00 Eurozone Final Manufacturing PMI. Exp. 46.6 points. Actual 46.8 points.
• 8:00 Italian Monthly Unemployment Rate. Exp. 11.8%. Actual 11.6%.
• 9:00 Eurozone Unemployment Rate. Exp. 12.0%. Actual 12.0%.
• 14:00 US Factory Orders. Exp. 3.1%.
• 14:00 US IBD/TIPP Economic Optimism. Exp. 46.1 points.
• All Day: US Total Vehicle Sales. Exp. 15.3M.

For more events and lines, see the Euro to dollar forecast

EUR/USD Sentiment

• Cyprus – details about the haircut and corruption allegations: The bailout agreement  may have been signed, but the drama and uncertainty continue. Capital controls are still in place in Cyprus. Over the weekend, authorities revealed the plan for taxing around 60% of the money on big accounts (above 100K) in the Bank of Cyprus. In addition, a newspaper in Cyprus published that a company owned by relatives of the president withdrew large sums of money prior to the initial bailout announcement. President Anastasiades asked to investigate it.
• Italy turns to “Ten Wise Men”: After coalition talks failed, the president reportedly considered resigning in order to accelerate the path to fresh elections. However, and perhaps due to pressure from ECB president Mario Draghi, president Napolitano appointed  a panel of  10 experts  including some politicians from mainstream parties (as well as others) in order to try and find another political solution. The Italian media has dubbed the  panel the “Ten Wise Men”. All humor aside, these “wise men” will have their hands full trying  to untie the Gordian knot of the inconclusive election results, which has  left the Eurozone’s third largest economy in a deep political crisis.  Also Italy’s small neighbor, Slovenia, has some issues. Here is some background about Slovenia.
• Spain and Italy post mixed numbers: On Tuesday, Spain and Italy  recorded weak  Manufacturing PMIs but positive employment numbers.  Spanish Manufacturing PMI came in at 44.2 points, well below the estimate of 46.2. Italian Manufacturing PMI followed suit, posting a reading of 44. points. The forecast stood at 45.4 points. On the employment front, Spain surprised the markets with a drop in Unemployment Change of 5.0 thousand, crushing the estimate of a rise of 30.2 thousand. In Italy, the markets were pleased to see the Unemployment Rate inch down to 11.6%, beating the estimate of 11.8%. The employment news is certainly welcome, but PMIs continue to remain a soft spot throughout the Eurozone, pointing to weakness in a wide range of sectors.
• Which way Germany?: Mario Draghi is exuding confidence that the Eurozone economy will improve later in 2013, but that certainly won’t happen if the German economy doesn’t lead the way. However, German data has been a mix recently, and this was underscored by recent economic releases. Retail Sales rose 0.5%, blowing past the estimate of a 0.4% decline. However, Unemployment Change hit a five-month high, jumping to 13 thousand. This was a major disappointment, as the markets had anticipated a respectable drop of 2 thousand. Unemployment was unchanged at 6.9%.
• US data points downward:   Last week saw a host of dismal US releases, as manufacturing, housing, consumer confidence  and employment  figures were all weak.  The month of April did not start on the right foot, as the ISM Manufacturing PMI  dropped sharply  from 54.2 points to 51.3 points, and  was well below the estimate of 54.2 points.  If the week continues in a downward trend, we will likely see a negative reaction from the markets. The  major  events for this  week include: ISM Non-Manufacturing PMI, ADP and  the Non-Farm Payrolls.