EUR/USD June 10 – Little Movement as Euro Consolidates

EUR/USD has started the new trading week quietly, as it trades  at the 1.32 line. The euro  enjoyed a solid week, gaining over two  cents against the US dollar.  On Friday US Non-Farm Payrolls looked solid,  beating the estimate. On Monday,  French Industrial Production sparked, jumping 2.2%, its  best  performance since  January 2011.  The sole US release is a speech by FOMC Member James Bullard.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar  dipped below the 1.32 line late in the session, touching a low of 1.3187. The pair consolidated at 1.3193. In the European session, the pair is trading at the 1.32 line.

Current range: 1.3160 – 1.3200.

Further levels in both directions:  

• Below: 1.3160, 1.31, 1.3050, 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750  and  1.27.
• Above: 1.32, 1.3255, 1.3306, 1.3350, 1.34, 1.3480, 1.3580  and  1.3710.
• 1.3160 is providing weak support.  This is followed by 1.31.
• On the upside, the pair is testing the 1.32 line. 1.3255 is next.

Euro  trading quietly  at 1.32 line  – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:45  French Industrial Production.  Exp. 0.2%. Actual 2.2%.
• 6:45  Italian Industrial Production.  Exp. 0.1%. Actual -0.3%.
• 8:30 Sentix Investor Confidence. Exp. -10.0 points. Actual -11.6 points.
• 13:50 US FOMC Member James Bullard Speaks.

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

EUR/USD Sentiment

• Euro flies after ECB Announcement:    The markets have become accustomed to volatility from  the euro after ECB  policy meetings, and  last week was no exception. The  euro  gained about  150 points after Thursday’s policy meeting,  and tested the 1.33 level before retracting. The ECB  held a steady course, maintaining the benchmark rate at 0.50% and  deposit rates at 0%.  ECB President Mario Draghi  downgraded the forecast for Eurozone growth in 2013 from 0.6% to 0.5%.  However, for 2014,  Draghi hiked    the forecast from 1.0% to 1.1%. The markets seemed to focus on the positive  aspect of Draghi’s comments, and the euro surged against  the US dollar, which was broadly weaker against the  major currencies.
• US employment numbers a mix: US Non-Farm Payrolls wrapped up the week on a positive note, as the key employment indicator rose from 165 thousand to 175 thousand. This was above the market forecast of 167 thousand. However, the Unemployment Rate rose to 7.6% from 7.5%. Earlier in the week, Unemployment Claims practically matched the estimate, but the markets responded with a lukewarm reaction. Employment numbers have added significance now that speculation has increased that the Fed could well wind up QE in the next few months, if the recovery seems to be deepening. However, the Fed may sit tight if the labor picture remains cloudy.
• Is Germany headed up, down, or both? Almost lost in all of the excitement after the ECB policy meeting last week was a very weak German manufacturing release. German Factory Orders slumped, falling from 2.2% to -2.6%,  its worst showing  since November 2012. On Friday, German Trade Balance remained steady at EUR 17.7 billion, well above the estimate of EUR 16.5 billion. There was more good news as German Industrial Production rose 1.8%,  blowing past the estimate of 0.0%.  Germany is the locomotive of the Eurozone economy, and the country will need to post continuous solid releases if the Eurozone is to get back on track.
• German Court Reviews OMT: The Federal Constitutional Court, Germany’s highest court, will review the ECB’s OMT (Outright Monetary Transactions) program starting on Tuesday. OMT is a rescue program which enables the ECB to buy bonds from members whose economies are struggling. Last week, ECB head Mario Draghi stated that OMT had helped bring stability to the global markets and was a key monetary policy measure. His upbeat  view lies in  sharp contrast to that of Bundesbank President Jens Weidmann, who voted against the program. In previous cases involving the legality  of ECB rescue packages, the German court has given its approval, but has not hesitated to add conditions. So we can expect the court to give the nod to OMT, although it could well be a qualified ‘yes’.