Euro dollar was down from yesterday’s levels (April 17th), shrugging off some sparkling economic confidence releases. The German Economic Sentiment posted a reading of 23.4, easily surpassing the market forecast of 19.7. Not be outdone, Euro-zone Economic Sentiment came in at 13.1, its best performance since May 2011. The markets remain wary about the fiscal situation in Spain. The country held a successful bond auction, raising the full target of EUR 3 billion. However, the government’s borrowing costs have almost doubled, and concerns persist as to the ability of the government to meet its deficit reduction goals. In stateside news, US Building Permits rose to 0.76M, beating the market forecast of 0.71M. This marked the best performance by the indicator since October 2008.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session: EUR/USD dropped to 1.3109, and consolidated at 1.3126. The pair is sliding in the European session, dropping under the 1.31 level, and is trading at 1.3082.
- Current range: 1.3087 to 1.3128.
- Further levels in both directions: Below: 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623.
- Above: 1.3165, 1.3212, 1.33, 1.3360, 1.3437, 1.3486 and 1.3550.
- 1.3212 has strengthened as the upper border for the pair.
- 1.31 is being tested, and is having trouble providing support.
Euro/Dollar climbing into mid-1.31 range – click on the graph to enlarge.
- 8:00 Current Account. Exp. 4.1B. Actual -1.3B.
14:30 Crude Oil Inventories. Exp. +1.6M.
For more events later in the week, see the Euro to dollar forecast
- Which Direction for the Euro?: Trading the Euro is becoming a daunting task, and volumes remain low, as traders struggle to find a clear direction for the continental currency. Despite successful auctions in Belgium, Greece and Spain, the euro can’t seem to make up its mind as it bounces up and down. Serious concerns remain about the fiscal health of the Euro-zone economies, with the crisis in Spain taking front row and center, for now.
- ECB to help Spain?: Europe’s fourth largest economy is still struggling to find a way to cut its deficit while enabling some growth. In the meantime, Spain and Italy are exchanging not-so-nice comments. The ECB stepped up its rhetoric against the high yields and hinted that it might intervene using its SMP program. This hasn’t been used so far. Spain has successfully raised EUR 3 billion in a government auction, but with very high borrowing costs, the markets remain wary.
- US Economy Sending out Mixed Signals: Analyst and traders must be scratching their heads at the mixed bag coming out of the US. Retail Sales hit 0.8%, better than the market forecast. However, the NY Manufacturing Index plummeted, way below the market prediction, as it posted a five month low. Weekly jobless claims rose to 380K and triggered worries. This is the first release after the disappointing Non-Farm Payrolls released on Friday, that showed only a small gain of 120K. Is the economy cooling down again, or is it only temporary? Here are 5 reasons why this may be temporary. Last week’s release of US consumer sentiment was lower than the market forecast, as consumers are still somewhat skeptical of the economic recovery. Consumer confidence, and in turn, consumer spending, are critical for improved growth in the US economy.
- Chinese Growth Sputtering?: After posting a weak growth rate last week, China’s economic indicators continue to be a source of concern for the markets. The latest disappointing release is Foreign Direct Investment, which dropped by 2.9% in March. Compared with a rise of some 26% last May, investors appear to be souring on opportunities in China. The markets can only hope that the decision by the Chinese central bank to widen the trading range of the yuan, the Chinese currency, will help jumpstart growth in the Asian giant.
- British Pound headed for 1.60?: With all the focus on EUR/USD over the past few days, let’s not forget about the British pound, which has absolutely shined in 2012. The pound is once again closing in on the psychologically significant 1.60 level, despite a sluggish economy and weak consumer confidence in the UK. Will we see the pound climb over this level this week? Given the continuing rise of GBP/USD, the likelihood of additional QE looks less likely.