EUR/USD Nov 9 – Struggling as Italian, French Data

EUR/USD  continues to struggle, as  the pair has been on a downward trend for most of the week. The euro  initially was  up following the US election on Tuesday, but has since coughed up those gains, following weak Euro-zone and German data. Today’s numbers out of Italy and France were no better. French Industrial Production  posted its sharpest drop  since 2009  and Italian Industrial Production also looked weak. As expected, the ECB maintained its key interest rate at 0.75%. In the US, the markets are expecting a slight decline in the UoM Consumer Sentiment indicator.

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

EUR/USD Technical

• Asian session: Euro/dollar posted some gains, trading as high as 1.2790. The pair has  lost ground  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.
• The pair is testing 1.2750 on the upside. 1.28 is stronger.
• 1.2670 is providing strong support.

Euro/dollar down after weak Italian, French data  – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:00 German Final CPI. Exp. 0.0%. Actual 0.0%.
• 7:45 French Industrial Production. Exp. -0.9%. Actual -2.7%.
• 7:45 French Government Budget Balance. Actual -85.0B.
• 9:00 Italian Industrial Production. Exp. -1.4%. Actual -1.5%.
• 13:30 US Import Prices. Exp. 0.0%.
• 2:55   US Preliminary UoM Consumer Sentiment. Exp. 82.6 points. See how to trade this event with USD/JPY.
• 2:55 US Preliminary UoM Inflation Expectations.
• 15:00 US Wholesale Inventories. Exp. +0.4%.

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

EUR/USD Sentiment

• America sticks with Obama: 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, however,  was very close, 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 breakthrough on Capital Hill, Obama will likely 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 vote was close, 153-128.  Meanwhile, some 80,000 people demonstrated against the plan outside of Parliament. 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. The Greek drama continues, as Parliament will vote on the 2013 budget on Sunday. For its part, the government is hoping that talk of a Grexit will subside once the budget is approved. Greece says it will run out of money on November 16, unless it receives the next tranche of aid under the bailout package.
• Fiscal Cliff Crisis Grips  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. There are three choices that lawmakers can deal with the fiscal cliff, none of which are particularly palatable. We can expect some tough, protracted  negotiations between the Republicans and Democrats, as lawmakers scramble to find a solution to the crisis.
• 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  Euro-zone seems to be getting more and more tenuous. Recent EU Summits and Euro-group meetings have not led to any breakthroughs, and  a bailout deal is not expected at the next summit on November 12th.  Both Greece and Germany may have reached their limits, and there are several other reasons why we could see a Grexit. Time is becoming more and more critical, as Greece is likely to run out of money sometime in November without further aid.
• German  economy in trouble: Anyway you slice it, 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 economic 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.