Euro dollar moved up slightly yesterday (April 11th), as the markets responded positively to a hint by the ECB that it may purchase more bonds to ease the financial crisis. However, investors remained concerned, with the focus now on Spain, which has declared it plans to implement new austerity measures, possibly in the next few weeks. There are numerous releases today in Europe and the US, but the markets will be focusing on US Unemployment Claims. These employment numbers could affect the direction of EUR/USD. In Europe, Industrial Production rose 0.5%, surprising the markets, which had forecast a 0.3% drop.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
EUR/USD Technicals
- Asian session: EUR/USD traded in a narrow range. The pair hit a high of 1.3139 and consolidated just a drop lower, at 1.3136. EUR/USD is down slightly in the European session, trading at 1.3111.
- Current range: 1.3090 to 1.3160.
- Further levels in both directions: Below: 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623.
- Above: 1.3110, 1.3212, 1.33, 1.3360, 1.3437, 1.3486, 1.3550 and 1.3615.
- 1.3080 proved to be a distinctive line separating ranges – it has again been broken on the upside, and is providing weak support. This line is holding for now, but could be tested on a downswing by EUR/USD.
- 1.30 used to be a round number without technical strength, but the recent challenge showed it is a serious barrier, and is providing support to EUR/USD
- Euro/Dollar is slightly up, although concerns about Spain remain – click on the graph to enlarge.
EUR/USD Fundamentals
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5:30 French CPI. Exp. 0.6%. Actual 0.8%.
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8:00 ECB Monthly Bulletin.
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9:00 Euro-zone Industrial Production. Exp. -0.3%. Actual 0.5%.
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11:15 FOMC Member Dudley Speaks.
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12:30 US PPI. Exp. 0.3%
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12:30 US Trade Balance. Exp. -51.9B
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12:30 US Unemployment Claims. Exp. 355K.
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12:30 US Core PPI. Exp. 0.2%
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13:00 FOMC Member Lockhart Speaks.
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14:30 Natural Gas Storage. Exp. 22B.
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15:00 FOMC Member Dudley Speaks.
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19:30 FOMC Member Raskin Speaks.
For more events later in the week, see the Euro to dollar forecast
EUR/USD Sentiment
- US Employment Numbers Disappoint: US Non-Farm Employment Change was a major disappointment, as only 120K non-farm jobs were created in March. This was well below the market forecast of a gain of 207K, and the lowest figures since December 2011. On a slightly positive note, the US unemployment rate inched down in March, to 8.2%. Given this mixed bag, the markets will be carefully watching the US Unemployment Claims, which will be released later today.
- Spanish worries: After a very disappointing bond auction, there are fresh concerns that Spain will be unable to cut its budget deficit to 3% of GDP, despite government assurances that it will implement a tough austerity plan and get its fiscal house in order. Europe remains very fragile.
- Greek foreign law bond deadline extended: Thought that the Greece will be out of the limelight for long? Think again. The holders of foreign law (mostly English-law) bonds refuse to accept the bond swap, and there’s no way Greece can force them to. The Hellenic Republic extended the deadline to April 20th, but the actual deadline is May 15th, when it needs to pay out. Any additional payment will stress the Greek government during an election period, and will complicate the tight calculations for its recovery. Greece didn’t declare bankruptcy on March 23rd, but this danger looms during the long Easter holiday, as well as every weekend until May 15th. A silver lining to the Greek crisis – a new record was set, as over $5 trillion exchanged hands in March.
- Chinese Trade Balance Surplus Surprises Markets: Chinese Trade Balance shot up to 5.4B in March. This respectable surplus was well above the market forecast of a 2.2B deficit. These figures came on the heels of the Chinese inflation data, which was also higher than expected. Given the immense economic importance of the Asian giant, any unexpected figures of important economic data can affect the direction of the major currencies.
- Stronger Numbers in Asia: Recent data confirms stronger growth in the Asian markets. Unemployment has dropped in Australia and South Korea, and exports jumped 15% in Malaysia and the Philippines. The mood in the Far East is bright, in sharp contrast to the pessimism engulfing Europe.
- FOMC Dampens Likelihood of Interest Rate Hike: The fallout continues in the currency markets following the release of the FOMC March meeting minutes indicated that the Fed will not launch a further round of QE. The euro has fallen over 1% against the dollar since the FOMC release.
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