EUR/USD Nov. 5 – Euro Weakens on US Employment Data,

EUR/USD  is weakening, as the markets react to the US  employment numbers from last week. US Non-Farm Payrolls were surprisingly strong last week, giving a boost the US dollar.  The US election is a dead heat,  and the market uncertainty is weighing on the euro. In today’s economic news, Spanish Unemployment Change looked awful, and Euro-zone Investor Confidence was weak, although a bit better than the estimate. In the US, ISM Non-Manufacturing PMI will be released, the final publication before the US presidential election on Tuesday.

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

EUR/USD Technical

• Asian session: Euro/dollar  was choppy, trading in the 1.2825  range. In the European session, the pair has dropped, falling   below 1.28.
• Current range: 1.2750 to 1.28.

Further levels in both directions:    

• Below: 1.2750, 1.2650, 1.2590 and 1.25.
• Above: 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, 1.3170, 1.3290 and 1.34.
• The pair is testing 1.28 as it weakens. 1.2880 is stronger.
• 1.2750 is the next line on the downside.

Euro/dollar weakens on strong US data, election uncertainty- click on the graph to enlarge.

EUR/USD Fundamentals

• 8:00 Spanish Employment Change. Exp. 90.3K. Actual  128.2K.
• 9:30 Euro-zone Sentix Investor Confidence. Exp.  -20.7 points. Actual  -18.8 points.
• 15:00 US ISM Non-Manufacturing PMI. Exp. 54.6 points. See how to trade this event with EUR/USD.

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

EUR/USD Sentiment

• Strong US employment data boosts dollar: US employment numbers were released last Friday, and given the close presidential race, there was something for everybody. Republicans were quick to focus on the higher unemployment rate, which edged from 7.8% to 7.9%. However, the Democrats (and the markets) pointed to the strong non-farm payrolls,which  climbed to 171 thousand, well above the estimate of 121K.  The dollar took full advantage of the positive report, gaining on the major currencies, including the euro.
• Greek government faces crucial votes: Once the winner of the US election is determined, the markets are likely to fix their focus on Athens,  as the Greek government tries to win approval for its austerity budget. Parliament will vote on  whether  to approve further cost cuts and tax hikes on Wednesday and on the 2013 budget on Sunday. The results could determine whether Greece receives the next tranche of the bailout package, which has been on hold since May. Prime Minister Antonis Samaras has warned that if the austerity measures and budget are rejected by Parliament, Greece will “descend into chaos”. However, the opposition  has promised  to fight the government’s measures, and  a massive protest and strike is planned in Athens for Tuesday.
• Constitutional snag could derail Greek deal: The thorny negotiations between the Greek government and the troika are not only dependent on economic and political factors, but constitutional issues as well. Two months ago, a German court ruled that the ESM was constitutional as far as Germany was concerned. Now, a Greek court has said that proposed retirement age hikes and pension cuts, demanded by the troika, could be unconstitutional. This could present another snag to the next tranche of aid for Greece, which desparately needs the funds to stay afloat.
• Obama, Romney tied one day before election: President Barack Obama and Republican contender Mitt Romney are holding final campaign rallies before Tuesday’s election. This contest promises to go down to the wire, with most polls pointing to a virtual tie between the two candidates. However, Obama has a slight lead in the crucial battleground states, and the markets may have already factored in a victory by the  President.
• Spain remains mum on bailout, despite economic woes: Spain is in the grips of a recession, and the economy shows no sign of improving in the near future. Employment numbers  continue to worsen  . Flash GDP declined for the fourth straight quarter, dropping by 0.3% in Q3, and today’s Manufacturing PMI pointed to further contraction.Yet, despite the worsening economy, the government appears in no rush to ask for an aid package, although it is “considering” doing so at some point. 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 is likely to keep the euro under pressure.
• Italy facing economic, political difficulties: 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 weak economy, as underscored by today’s weak Manufacturing PMI. 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.