EUR/USD April 11 – Markets Eye US Employment Numbers

EUR/USD lost some ground on Wednesday, as the pair crossed above the 1.31 line, but failed to hold on, and closed the day at 1.3050. The euro  has edged higher  in Thursday’s European session, and is again close to the 1.31 line. Today’s highlight is US Unemployment Claims, as the markets finally get to see some US numbers for the first time this week. In the Eurozone, German and French CPI data came in within expectations. The ECB released its monthly bulletin, and analysts will be going through it carefully, looking for hints about future monetary policy.

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

EUR/USD Technical

• Asian session: Euro/dollar edged higher, consolidating at 1.3071. The pair has inched higher in the European session.
• Current range: 1.3050 to 1.3100.

Further levels in both directions:    

• Below: 1.3050, 1.30, 1.2960, 1.2880, 1.2805, 1.2750, 1.2660, 1.2624  and 1.2587.
• Above: 1.31.00, 1.3130, 1.3170, 1.3290, 1.3350 and 1.34.
• 1.31 is a weak resistance line. 1.3170 is a key level.
•  1.3050 is providing support. 1.3000 is stronger.

Euro  edging towards 1.31 line  – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:00 German Final CPI. Exp. 0.5%. Actual 0.5%.
• 6:45 French CPI. Exp. 0.7%. Actual 0.8%.
• 8:00 ECB Monthly Bulletin.
• 12:30 US Unemployment Claims. Exp. 362K.
• 12:30 US Import Prices. Exp. -0.4%.
• 12:30 US FOMC Member James Bullard Speaks.
• 14:30 US Natural Gas Storage. Exp. -12B.
• 17:00 US 30-year Bond Auction.

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

EUR/USD Sentiment

• FOMC split over QE: The most exciting thing about the FOMC meeting minutes was that they were leaked earlier than scheduled on Wednesday, and the Federal Reserve has ordered an investigation into the matter. The minutes themselves turned out to be a non-event, with policymakers divided as to the extent and duration of the current round of QE. Some members wanted to  wind down  the program in mid-2013, while others felt it was more appropriate to wait until the end of the year. There was also discussion about whether to decrease the amount of purchases immediately, or continue the present levels until the end of the year. The division in opinion reflects uncertainty over the extent of the US recovery and the health of the economy. With the US reeling off a host of poor releases throughout April,  FOMC members might have had a different take  on  the QE program  had  the meeting  taken place in April rather than March.
• German numbers point up: With Eurozone numbers continuing to look weak for the most part, there is a ray of sunshine, as German releases are showing better numbers. Last week, German Factory Orders  jumped 2.3%, after a decline the previous month. This easily  beating the forecast of 1.2%. The good news continued this week, as German Industrial Production improved by 0.5%, edging past the forecast of 0.4%. On    Tuesday,  German  Trade Balance hit a six month high, posting a  surplus of 17.1 billion euros. This was well above the estimate of 16.2 billion euros. If the  Eurozone is to turn the corner, it will need  Germany, the largest economy in the  zone, to lead the way to recovery. Stronger German numbers should lead to better Eurozone readings, which have been anything but impressive so far in 2013.
• Euro keeps on rolling: The Cyprus bailout crisis is not yet behind us, the Eurozone is suffering from a sputtering economy and high unemployment, and even ECB head   Mario Draghi toned down his usual optimism at last week’s ECB press conference. Sounds like a recipe for a weaker euro?  Evidently not, as the euro continues to soar against the dollar, having gained  about three cents  since the beginning of April.  The euro  has received  a boost from a long string of weak US numbers,  as well as some positive data out of  Germany this week.  However, the severe problems in the Eurozone will not disappear anytime soon and could put a damper on the euro’s current rally.
• Markets Hoping for US rebound:  The US is on a bad streak, as every key release over the past two weeks has fallen below expectations. The data comes from across the economy –  manufacturing, housing, consumer confidence and employment numbers have all  missed their estimates.  Employment numbers were dismal, and have helped the euro post impressive gains against the US dollar. this week. Has the US recovery stalled? The US hasn’t released any key fundamentals so far this week. Unemployment Claims will be released on Thursday, with the markets getting a look at US numbers after a quiet week so far.  Additional major releases are scheduled for Friday. If the US can turn things around and post some stronger numbers, we could see the dollar improve after losing a lot of ground to the euro since last week.
• Portugal Court Strikes Down Austerity Package: Portugal was back in the news as  the country’s Constitutional Court  struck down  some austerity measures that the government announced  earlier  this year. The measures are part of a   bailout package that Portugal received in 2011.  The court  invalidated steps that included  tax hikes worth 5 billion euros, which has left the country 1.4  billion euros short in expected  revenue.  The economy  contracted  3.2% in 2012, and  Portugal is behind in its deficit reduction targets.  The legal wangling could exacerbate the country’s difficult economic situation and lead to a full-blown crisis, which is the  last  thing the Eurozone needs.