Euro dollar rebounded from yesterday’s slide (April 18th), as the pair has climbed into the mid-1.31 range. The markets remain wary about the fiscal situation in Spain. The country held a successful bond auction earlier in the week, raising the full target of EUR 3 billion in government bonds. Another auction to raise EUR 2.5 billion is scheduled for today. However, the yields on these bonds have risen above 6%, adding to markets concerns that Spain may come the ECB with cap in hand, asking for a bailout. We could see some movement by EUR/USD following the release of three key US releases later today: Unemployment Claims, Existing Home Sales and the Philly Fed Manufacturing Index.
Here’s an update on technicals, fundamentals and what’s going on in the markets.
- Asian session: EUR/USD dropped to a low of 1.3107, and consolidated at 1.3117. The pair is up in the European session, trading at 1.3138.
- Current range: 1.3107 to 1.3165.
- Further levels in both directions: Below: 1.30, 1.2945, 1.2873, 1.2760, 1.2660 and 1.2623.
- Above: 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 acting as a weak support level.
Euro/Dollar has climbed into the mid-1.31 range – click on the graph to enlarge.
- Tentative: Spanish 10-y Bond Auction.
- 12:30 US Unemployment Claims. Exp. 370K.
14:00 Euro-zone Consumer Confidence. Exp. -19.
14:00 US Existing Home Sales. Exp. 4.62M.
14:00 US Philly Fed Manufacturing Index. Exp. 12.1.
14:00 US Leading Index. Exp. 02%.
14:30 US Natural Gas Storage. Exp. 10B.
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. Adding to the uncertainty is the fact that there don’t seem to be any fundamental developments to explain the curreny’s movements. Despite successful auctions in Belgium, Greece and Spain, the euro can’t seem to make up its mind as it bounces up and down.
- Pain in Spain: Serious concerns remain about the fiscal health of the Euro-zone economies, with the crisis in Spain taking front row and center, for now. Spain will be auctioning off government bonds for the second time this week. Even if the full amount of EUR 2.5 billion is raised, given that these bonds are paying over 6%, the markets are nervous about Spain’s ability to meet the higher borrowing costs. With the fourth-largest economy in the Euro-zone, the ECB cannot simply let the country sink in a sea of debt. Can Spain get its fiscal house in order?
- 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. Building Permits were up, but Housing Starts were down. Confusing? Weekly jobless claims rose to 380K and triggered worries. This is the first release after the disappointing Non-Farm Payrolls released last week, which 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. With three key releases scheduled for later today, we could see some movement by EUR/USD before the end of the trading week.
- Chinese Downturn?: 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 jump start growth in the Asian giant.