EUR/USD Jan 29 – Markets Eye Fed Policy Meeting

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EUR/USD continues to trade in the mid-1.34 range, as the markets await Tuesday’s key Federal Reserve monetary policy meeting. On Monday, US Durable Goods Orders was very strong, but Pending Homes Sales was awful. German data was mixed, as German Consumer Climate rose slightly, and matched the market estimate. However, German Import Prices declined more than expected. Today’s key release is US CB Consumer Confidence.

EUR/USD Technical

  • Asian session: Euro/dollar was subdued, and consolidated at 1.3435. The pair has edged higher in the European session.
  • Current range: 1.34 to 1.3480.

Further levels in both directions:  EUR USD Daily Forecast January 29

  • Below: 1.34, 1.3360, 1.3290, 1.3255, 1.3170, 1.3130, 1.3110, 1,3030, 1.30, 1.2960, 1.2880 and 1.28.
  • Above: 1.3480, 1.36, 1.3750 and 1.3838.
  • 1.34 continues to provide support. 1.3360 is stronger.
  • On the upside, 1.3480 is providing strong resistance.

Euro/dollar steady ahead of Fed policy meeting– click on the graph to enlarge.

EUR/USD Fundamentals

  • 7:00 GfK German Consumer Climate. Exp. 5.8 points. Actual 5.8 points.
  • 7:00 German Import Prices. Exp. -0.1%. Actual -0.5%.
  • 14:00 US S&P/CS Composite-20 HPI. Exp. 5.5%.
  • 15:00 US CB Consumer Confidence. Exp. 64.8 points.

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

EUR/USD Sentiment

  • Euro continues to fly high: The euro continues to trade well above the 1.34 level, after posting strong gains against the US dollar last week. 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 markets are confident in the high-flying high euro, at least for now.
  • All Eyes on Federal Reserve: The markets will be closely watching as the Federal Reserve holds a two-day policy meeting.  The Fed has not been in the headlines lately, but is busy at work, as it increased its purchases of securities in January from $40 billion to $85 billion. This has pushed the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. The markets will be paying close attention to the Fed’s take on the economy, and any new steps by the Federal Reserve could affect the direction of EUR/USD.
  • Is US Housing Market in Trouble? Although the US has posted been able to point to some strong releases recently, recent housing numbers have been in the tank. Last week, New Home Sales dipped to 369 thousand units, way below the estimate of 387 thousand. This shocked the markets, which had anticipated a modest gain of 0.5%. Pending Home Sales fared no better, plunging by 4.3%. This was the indicator’s worst showing since last May. The two key housing indicators points to weakness in the US housing industry, a critical component for economic growth. The bumpy US recovery will continue to limp along if these numbers don’t improve soon.  
  • Cyprus Credit Rating Downgraded: Cyprus saw its credit rating drop late last week, as Fitch Ratings cut the island country’s credit rating by two levels to B. Fitch noted that that recapitalization costs for the Cypriot banking sector could be as high as 10 billion euros, higher than previously estimated. Cyprus officially requested a bailout last June and is negotiating the terms with the ECB and the IMF. Fitch’s move follows a reduction by Moody’s, which downgraded the country’s forecast by three levels to Caa3. The downgrades underscore the weakness and vulnerability of the Cypriot economy and will increase pressure on all sides to reach an agreement on the terms of a rescue package.

 

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Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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