EUR/USD Feb 1 – Barrels Above 1.36 as German

EUR/USD continues to climb, as the pair pushed across the 1.36  level  early on Friday.  The pair is now at its highest level since November 2011. The  euro  received a boost  from  German Unemployment Claims, which posted their sharpest drop  since last  March.  In the US, this week’s GDP and employment numbers were weak, and the markets will be hoping for better news from Friday’s key employment releases – Non-Farm Employment Change and the Unemployment Rate. As well,  ISM Manufacturing PMI will be released.  Back in Europe, Friday’s PMIs were within markets expectations. The markets will be keeping a close eye on the Eurozone Unemployment Rate, which will be released later in the day.

Update:  EUR/USD Breaks Above Uptrend Resistance, Enjoys Lower Unemployment, CPI

EUR/USD Technical

• Asian session: Euro/dollar pushed above 1.36, touching a high of 1.3640. The pair consolidated at 1.3555. The pair is unchanged in the European session.
• Current range: 1.3610 to 1.3690.

Further levels in both directions:  

• Below: 1.3610, 1.3588, 1.3550, 1.3480, 1.34, 1.3360, and 1.3290.
• Above: 1.3690, 1.3790, and 1.3860.
• 1.3610 is providing  weak support. There is major support at 1.3480.
• On the upside, 1.3690 is providing strong resistance.

Euro/dollar  climbs above 1.36  – click on the graph to enlarge.

EUR/USD Fundamentals

• 8:15  Spanish Manufacturing PMI. Exp. 45.5 points. Actual  46.1 points.
• 8:45  Italian Manufacturing PMI. Exp. 47.6 points. Actual  47.8 points.
• 9:00 Eurozone Final Manufacturing PMI. Exp. 47.5 points. Actual  47.9 points.
• 9:00: Italian Monthly Unemployment Rate. Exp. 11.3%. Actual 11.2%.
• 10:00  Eurozone CPI Flash Estimate. Exp. 2.2%.
• 10:00  Eurozone Unemployment Rate. Exp. 11.9%.
• 13:30 US Unemployment Rate. Exp. 7.8%.
• 13:30 US Non-Farm Employment Change. Exp. 161K. See how to trade the NFP with EUR/USD.
• 13:30 US Average Hourly Earnings. Exp. 0.2%.
• 13:30 US FOMC Member William Dudley Speaks.
• 14:00 US Final Manufacturing PMI. Exp. 56.1 points.
• 14:55 US Revised UoM Consumer Sentiment. Exp. 71.4 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US  ISM Manufacturing  PMI. Exp. 50.8 points.
• 15:00 US Construction Spending. Exp. 0.6%.
• 15:00 US ISM Manufacturing Prices. Exp. 56.3 points.
• All Day:  US Total Vehicle Sales. Exp. 15.2M.

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

EUR/USD Sentiment

• Fed maintains course: All eyes were on the Federal Reserve this week, as the powerful US central bank met for a two-day policy meeting. There were no surprise developments, as the Fed stated it would continue its open-ended QE3 program until the outlook for the labor market “improves substantially”. The Fed noted that economic growth had stalled, but was confident  that the pause was  a temporary one. This laid to rest  speculation  that the current round of QE, under which the Fed is purchasing $85 billion a month in securities, might be terminated anytime soon. The Fed maintained its ultra-low benchmark interest rate, saying there would be no change until unemployment drops below 6.5%. With US unemployment close to 8%, we will likely be hearing this refrain for the foreseeable future.
• Euro sky high despite Eurozone troubles: The euro continues to climb to new levels, and  is enjoying the view above the 1.36  horizon, its highest level since  November 2011. The currency had a spectacular January, gaining about six cents against the US dollar. The continental currency has been bolstered by improving German data, as well as optimistic forecasts about the Eurozone economy from ECB President Mario Draghi and others. These officials acknowledge that the Eurozone is going through a tough time, but are confident that the economy will bounce back later in 2013. Although a range of indicators, notably employment and PMI numbers, point to a deepening recession and continuing fallout from the debt crisis, the euro is enjoying the ride, at least for now.
• Is Germany back on track?: The German locomotive will have to  shift into high gear  if the Eurozone economy  is to get back on its feet in 2013.  Although  German  economic indicators  have been  mixed,  market sentiment has risen after some outstanding data. Last week, ZEW Consumer Sentiment shot up to its best level in almost three years, and this week’s Unemployment Claims dropped sharply. These positive releases have played a major role in the meteoric rise of the euro in the past few weeks. The markets are well aware that as goes Germany, so goes Europe, and will be hoping that the positive German data is reflected in the Eurozone indicators as well.
• Markets fret over weak US housing numbers: Although the US has posted been able to point to some strong releases recently, recent housing numbers have been in the tank. New Home Sales was a disappointment, falling well below the estimate. Pending Home Sales fared no better, plunging by 4.3%. This was the key indicator’s worst showing since last May. These dismal readings points to weakness in the US housing industry, a critical component for economic growth. The US recovery will continue to limp along if these numbers don’t improve soon.
• US   recovery continues to hit bumps: The extent of the US recovery is anyone’s guess, as US numbers continue to keep the markets guessing. Employment numbers have  looked sharp, although Thursday’s  Unemployment Claims was a disappointment.  Retail sales  and PMIs  have been generally positive, but this has been offset by weak housing and consumer confidence data. This week’s GDP reading was abysmal, as the US economy  contracted by 0.1%. Although a very modest loss, there is bound to be negative market reaction, as this was the first decline since 2009, and the markets had anticipated a 1.1% gain. The US will be releasing further key employment numbers Friday, and the markets will be hoping to wrap up a busy week on a positive note.