Search ForexCrunch

EUR/USD  is almost unchanged  on Tuesday, continuing the lack of movement we saw on Monday.  In the European session, the pair is trading in the mid-1.36 range. On  Monday,  US Existing Home Sales was down, but within expectations.  Today’s highlights  are Non-Farm Payrolls and the Unemployment Rate, which were not released during  the shutdown.  There are no Eurozone releases on Tuesday.

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

EUR/USD Technical

  • In the  Asian  session, EUR/USD  edged lower, touching a  low of 1.3662 and consolidating at 1.3674.  The pair  is unchanged  in the  European session.
  • Current range: 1.3650 to 1.3710.

Further levels in both directions:      EUR USD Daily Forecast_Oct. 22th

  • Below: 1.3650, 1.3570, 1.3500, 1.3460, 1.3415, 1.3325, 1.3240, 1.3175 and 1.3100.
  • Above: 1.3710, 1.3800, 1.3870, 1.3940 and 1.4036.
  • 1.3650  continues to  provide weak support. 1.3570 is next.
  • 1.3710  is the next line of resistance. The round number of 1.3800 follows.

EUR/USD Fundamentals

  • 12:30 US Non-Farm Employment Change. Exp. 182K.
  • 12:30 US Unemployment Rate. Exp. 7.3%.
  • 12:30 US Average Hourly Earnings. Exp. 0.2%.
  • 13:00 US TIC Long-Term Purchases. Exp. 30.9B.
  • 14:00 US Construction Spending. Exp. 0.5%.
  • 14:00 US Richmond Manufacturing Index. Exp. 0 points.
  • 14:30 US Natural Gas Storage. Exp. 81B.

* All times are GMT.

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

EUR/USD Sentiment

  • Markets  Await Non-Farm Payrolls:  The recent government shutdown  cancelled some  US economic releases, notably  Non-Farm Payrolls,  one  of  the most  important  employment releases.  The  September report was  supposed to be released in early October, but has been rescheduled for release later on Tuesday.  The NFP release could have a major impact on  EUR/USD. Meanwhile, last week’s  Unemployment Claims came in at 357 thousand, very close to the estimate of 358 thousand. This figure was an improvement from last week, but still well above previous releases. The shutdown inflated the release, as hundreds of thousands of Federal employees were laid off. This week’s claim is lower, with an estimate of 341 thousand.
  • Eurozone inflation  remains low:  Inflation in the Eurozone continues to be subdued, as underscored by German PPI which posted a modest gain of 0.3%. This was the indicator’s first gain since January.  Other inflation indicators have been weak, pointing to sluggish economic activity. The ECB has stated that its inflation target is “close to, but below 2%”, but Eurozone CPI releases continue to fall short of this target and the September release came in at 1.1%. The ECB is reluctant to lower interest rates in order to boost inflation, so it seems low inflation will remain until economic growth picks up.
  • Debt ceiling averted, but dollar loses ground: With the US staring at a  sovereign default for  the first time in its history,  the Republicans and Democrats finally reached an agreement  last week  to reopen the government and raise the  debt ceiling. However, the deal  provides short-term relief only – the government will be funded until January 15, while the debt limit will be raised until February 7. Both sides have agreed to discuss budget issues and try to reach a long-term agreement before December 13. So we could be right back where we started in just a few months. The  Republicans appear  to be the big losers in this saga,  as they  failed to obtain any concessions  regarding the Obama  health care act  and are blamed by most of  the public for precipitating an unnecessary political and fiscal crisis. The dollar initially gained ground after the agreement was announced, but was broadly lower as optimism faded. On Friday, EUR/USD  touched above the  1.37 line, an eight-month high.
  • Fed unlikely to taper QE: The crisis mood in Washington has cleared for now, but the agreement hammered out in Congress  provides short-term relief only, as  it  raises the debt ceiling until early February  and funds the government until  mid-January. The underlying budgetary issues remain unresolved, and in this tense situation, the Fed is unlikely to push the taper trigger until some time in 2014. Ongoing QE is the main factor weighing on the dollar and we can expect this situation to continue for a while yet.