EUR/USD Nov. 1 – Under Pressure as Markets Wary About

EUR/USD  has weakened from yesterday’s (October 31st) levels, as Hurricane Sandy has subsided and the  US  begins  to slowly recover from the devastating storm.  The weather may be better in Europe, but the markets are anything but calm as  the uncertainty  over Greece and Spain continue.  At a meeting of the Euro-zone  finance ministers on Wednesday, there were reports of progress on the thorny issue of more aid for Greece under the bailout agreement. In Spain, the government continues to hedge regarding a bailout, which promises to keep pressure on the euro. There are no Euro-zone releases today, with France and Italy enjoying a bank holiday. In the US, there are a host of releases today following the abbreviated week. The markets will  be keeping an eye on four key release – ADP Non-Farm Employment Change, Unemployment Claims, CB Consumer Confidence and ISM Manufacturing PMI.

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

EUR/USD Technical

• Asian session: Euro/dollar was steady, and consolidated around 1.2970. In the European session, the pair has edged lower.
• Current range: 1.29 to 1.2960.

Further levels in both directions:    

• Below: 1.29, 1.2814, 1.2750 and 1.2670.
• Above: 1.2960, 1.30, 1.3030, 1.3075, 1.3105, 1.3170, 1.3290 and 1.34.
• 1.2960 is providing weak resistance. 1.30 is now in a resistance role.  
• 1.29 is providing support.

Euro/dollar weakens as Greece, Spain uncertainty weighs on the pair- click on the graph to enlarge.

EUR/USD Fundamentals

• 11:30  US Challenger Job Cuts.
• 12:30 US ADP Non-Farm Employment Change. Exp. 139K. This indicator precedes the government Non-Farm Employment Change, which will be released on Friday.
• 12:30 US Unemployment Claims. Exp. 371K.
• 12:30 US Preliminary Non-farm Productivity. Exp. +1.3%.
• 12:30 US Preliminary Unit Labor Costs. Exp. +1.3%.
• 13:00 US Final Manufacturing PMI. Exp. 51.5 points.
• 14:00 US CB Consumer Confidence. Exp. 72.4 points.
• 14:00 US ISM Manufacturing PMI. Exp. 51.2 points. See how to trade this event with USD/JPY.
• 14:00   US Construction Spending. Exp. +0.7%.
• 14:00 US ISM Manufacturing Prices. Exp. 56.2 points.
• 14:30 US Natural Gas Storage. Exp. 77B.
• All Day: US Total Vehicle Sales. Exp. 15.0M.
• 16:30 US FOMC Member Sandy Lockhart Speaks.

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

EUR/USD Sentiment

• Eurogroup reports progress over Greek bailout: The Euro-zone finance ministers surprised the markets following an announcement that “considerable progress” had been made with regard to a deal between Greece and the troika. An agreement would pave the way for the next tranche of aid to Greece, and allow it to avoid bankruptcy. The chairman of the Eurogroup, Jean Claude Juncker, sounded very optimistic, saying that he expected a deal to be reached when the finance ministers meet in person on November 12, provided that Greece accepted a list of conditions. However, the Greek coalition government is split on whether to accept the troika demands, and the government has delayed the vote on new austerity measures by another week. Will this report of an imminent deal prove to be legitimate?
• US recovery underway: Rescue and recovery efforts continue as the US tries to steady itself after Hurricane Sandy slammed the US northeast on Monday. Sandy is possibly the worst storm to ever hit the US, and has left enormous damage in its wake. At least 70 people have died, damage is estimated at $30 billion so far, and millions of people remain without power. GDP was hardly OK in Q3. New York City, the country’s main financial center,  was hit hard, and large parts of the city remain paralyzed, as the transit system and major tunnels remain closed. The city is slowly getting back on its feet, as the airports and stock exchanges are again running. After being on the back-burner all week, the presidential campaign is likely to heat up, with the elections  less than a week  away.
• Spain remains mum on bailout timing: Spain is in the grips of a recession, and the economy shows no sign of improving in the near future. Unemployment rate hit another record, rising slightly to 25%. Flash GDP declined for the fourth straight quarter, dropping by 0.3% in Q3. Yet, despite the worsening economy,  the government  appears in no rush to ask for an aid package. One government source explained that the country might ask for aid, but there is no rush right now. Ironically, promises of help from the EU have lowered   Spain’s borrowing costs from their unsustainable levels, resulting in less pressure on the government to request an aid package. The continuing uncertainty promises to keep Spain in the headlines, sour market sentiment and put pressure on the euro.
• German figures alarm markets: German data continues to look sluggish. Last week, the markets were greeted with disappointing PMI manufacturing and services and the Ifo Business Climate dropped to its lowest level since March 2010. The news was no better on the employment front. German Unemployment Claims jumped to their highest level in over three years, and the unemployment rate remained stuck at 6.9%. The weak German numbers are likely to exacerbate market jitters over the health of the German economy. With mounting economic problems at home, the German government will be in no mood to cough up more funds for Greece and Spain.
• Italy’s bond auction successful, but  government in trouble: The markets were pleased with the Italian 10-year Bond Auction, which dropped to an average yield of 4.92%. This was a drop from the previous auction, with a yield of 5.24%, and the lowest level in 17 months. The positive economic news comes at at delicate time for the Italian government, which is facing growing debt and a shrinking GDP. Former PM Silvio Berlusconi, who heads the largest party in parliament, has accused the government of leading Italy into recession. If the unpredictable Berlusconi ends his support for the government, Italy could face early elections.