EUR/USD has moved higher in cautious trading, pushing above the 1.32 line in Monday’s Asian session. The markets are carefully watching parliamentary elections in Italy, with results due to be released later on Monday. There is little happening on the fundamental front as we begin the trading week, with no releases out of the US on Monday, and just one Eurozone release – a speech by Deutsche Bundesbank President Jens Weidmann.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- Asian session: Euro/dollar moved up late in the session, touching a high of 1.3224. The pair then consolidated at 1.3210. In the European session, the pair has edged higher.
- Current range: 1.3170 to 1.3255.
- Below: 1.3170, 1.3130, 1.3110, 1.3030, 1.30 and 1.2960.
- Above: 1.3255, 1.3290, 1.3360, 1.34, 1.3486, 1.3588, 1.3690 and 1.3740.
- 1.3170, which capped the pair for a long time, is now strong support.
- On the upside, 1.3255 is the next line of resistance.
Euro/dollar cautious in low range – click on the graph to enlarge.
- All Day: Italian Parliamentary Election (Day 2). Exit polls expected at 14:00 GMT.
- 15:30 Deutsche Bundesbank President Jens Weidmann Speaks.
For more events and lines, see the Euro to dollar forecast
- Markets eye Italian election: The euro-zone’s third largest economy goes to the polls on Sunday and Monday, as Italians choose a new government. Results are expected Monday at 15:00. There is a close race between current center-leaning PM Mario Monti, center left leader Pier-Luigi Bersani, center-right PM Silvio Berlusconi and also the alternative candidate Beppe Grillo of the 5 Star Movement. There are fears that Berlusconi will eventually fare very well, and could return to his former job. Another fear is that Italy will have a hung parliament. The best scenario for the markets is a strong outcome for Bersani and Monti, that would form a government together and continue the current economic policy. Berlusconi’s improving standing shook up the campaign and has contributed to nervousness in the markets. A diversion from the path of reform could significantly hurt the euro.
- German numbers shine: The German IFO Business Climate sparkled, climbing to its highest level since April 2012. The figure exceeded expectations and joined the positive ZEW number. This increases the optimism that Germany will rebound with strong growth in Q1, after the economy contracted 0.6% in Q4. However, PMI numbers showed that the rest of the continent is mired in a deep recession. ECB head Mario Draghi insists that the Eurozone has turned the corner, and will recover later in 2013. The markets will need to see some improved releases before joining in his optimism.
- Dollar improves after FOMC Minutes: The US Federal Reserve released the minutes of its most recent FOMC meeting last week. The minutes indicated that policymakers had discussed slowing or even stopping the current round of QE before the US employment situation brightens, due to concern about the negative effect that QE could have on the financial markets. This is the same reaction seen after the previous meeting minutes, but the policy is unlikely to change anytime soon. The minutes still move markets, and the euro lost ground following the Fed release.
- US numbers keep markets guessing: The markets are having a tough time measuring the extent of the US recovery, as US data continues to paint a mixed picture. Last week was no exception, as Unemployment Claims was worse than expected. Existing Home Sales managed to beat the estimate, but Housing Starts failed to meet expectations. The manufacturing sector continues to be a sore spot in the economy, as the Philly Fed Manufacturing Index plunged. Despite the lackluster fundamentals, the dollar posted sharp gains against the euro last week, as the struggling Eurozone can only envy the problems affecting the US.