EUR/USD Nov 8 – Weaker after Disappointing German Data,

EUR/USD  continues to weaken, following yesterday’s  (Nov. 7th) losses.  The euro improved  after  President Obama won Tuesday’s US election, but has  lost ground since.  EUR/USD reacted negatively  as German industrial production  fell  1.8% in September, well beyond expectations  of a 0.5% decline. As well, German Trade Balance declined, falling below the market estimate. The markets are also concerned with the fiscal cliff, which  if unchecked, could  send the US into a recession. The ECB will announce its key interest rate today. In the US, there are two key releases – Trade Balance and Unemployment Claims.

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

EUR/USD Technical

• Asian session: Euro/dollar  traded around 1.2760. The pair has edged downwards in the European session.
• Current range: 1.2670 to 1.2750.

Further levels in both directions:    

• Below: 1.2670, 1.2590 and 1.25.
• Above: 1.2750, 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, 1.3170, 1.3290 and 1.34.
• 1.2750 is currently providing weak resistance. 1.28 is stronger.
• 1.2670 is the next line on the downside.

Euro/dollar down after weak German data, fiscal cliff worries – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:00 German Trade Balance. Exp. +17.2B. Actual +17.0B.
• 7:45  French Trade Balance. Exp. -5.0B. Actual -5.0B.
• 12:45 Euro-zone Minimum Bid Rate. Exp. 0.75%.
• 13:30 ECB Press Conference.
• 13:30 US Trade Balance. Exp. -44.9B.
• 13:30 US Unemployment Claims. Exp. 367K.
• 15:30 US Natural Gas Storage. Exp. 27B.
• 18:00 US 30-year Bond Auction.

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

EUR/USD Sentiment

• Obama wins big: President Barack Obama was reelected to a second term as president, as he tallied around 300 electoral votes and decisively defeated Republican Mitt Romney. Most of the swing states supported the Democrats, giving Obama a resounding victory. The popular vote was a very close race,  underscoring the deep divide in the US between the two political camps.  In the congressional races, the picture remained  very much the same. The Democrats retained control of the Senate, while the Republicans kept their majority in the House of Representatives. This means that Congress will continue to be divided along partisan lines, and unless there is a dramatic breakthough on Capital Hill, Obama will face more gridlock   in his second term in office.
• Greek Parliament votes for  austerity package: In  a stormy session, the Greek Parliament approved the government’s austerity package, in exchange for more aid under the bailout package. The austerity  plan, which includes 13.5 billion euros in cuts,  will  eliminate 15,000 public employee jobs, cut the minimum wage by 22 percent, and  slash pension plans. Prime Minister Samaras has promised that these will be the last cuts to wages and pensions, but most Greeks, hard-hit by the economic crisis, are understandably skeptical. A massive 48-hour strike began on Tuesday, and there were 100,000 protesters outside Parliament when the vote took place. Parliament will vote on the 2013 budget on Sunday, and the government is  hoping that talk of a Grexit will subside once the budget is approved.
• Fiscal Cliff Worries in US: With an Obama win in the bag, the markets have quickly shifted focus to a looming US fiscal crisis. The so-called fiscal cliff  could occur at the end of the year, when tax breaks are set to expire at the same time that government spending cuts are scheduled to take place. Congress and President Obama will have to reach some compromise, otherwise the US could be hit with a recession in 2013.
• Will Greece remain in the Euro-zone?: Since the debt crisis hit, this question has often been asked, but the answer is anything but simple. With the huge political and economic problems that are rocking Greece, the country’s membership in the EZ seems to be getting more and more tenuous. Both Greece and Germany may have reached their limits, and there are several other reasons why we could see a Grexit.
• Weak German Data Continues: Anywhere you look, the numbers out of Germany are a cause for great concern. Unemployment is up, investor confidence in the German economy is  down and    the PMIs  continue to  point to ongoing contraction. Industrial Production  recorded a 1.8% drop, its worst  performance since  June. The weak numbers  are not just bad for the euro, but  could  also complicate efforts to provide aid to Greece and Spain. With a worsening economy  at home, the German  government will be even more reluctant to provide a helping hand to struggling zone members.