EUR/USD – Drops Below 1.31 as US numbers Continue to Point Downwards

EUR/USD has lost ground as we begin the new trading week. The pair has moved below the 1.31 line, and was trading in the mid-1.30 range in the Monday European session. On Friday, there were more weak, US numbers, as four major releases fell below expectations. Monday has just four releases. Eurozone Trade Balance posted a higher surplus, beating the forecast.  In the US, the markets will be monitoring the Empire State Manufacturing Index.

The US released a host of data on Friday, and the grim news continued. After a solid Unemployment Claims reading on Thursday, there was hope that the US would rebound from a string of dismal releases, but the wheels just fell off the cart on Friday. Core Retail Sales and Retail Sales both declined by 0.4%. PPI dropped 0.6%, and UoM Consumer Sentiment wrapped up an awful week. The key consumer indicator came in at 72.3 points, way off the estimate of 79.1 points. The continuing weak numbers are bound to raise serious concerns about the extent of the recovery, as the US has churned out weak numbers since late March. 

The Cyprus bailout agreement has been signed, but is the crisis really over? Eurogroup finance ministers met last Friday and approved a EUR 10 billion loan to Cyprus. Under the agreement, Cyprus will have to kick in EUR13 billion. Back in March, Cyprus was only supposed to add another EUR 7 billion. However, the deal collapsed after Cyprus balked at taxing every bank deposit in the country following a huge outcry on the island. Cyprus president Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will shrink by 13% in 2013 and 2014.

EUR/USD for Monday, April 15, 2013

1.3057 H: 1.3108 L: 1.3052

EUR/USD Technical

The euro has lost ground against the dollar as we start the trading week, as EUR/USD trades in the 1.3060 range.  The pair faces resistance at the round number of 1.31. This is followed by a resistance line at 1.3170. On the downside, there is weak support at 1.3050. This line could see further activity. There is a stronger support level at 1.3000.

Current range: 1.3050 to 1.31.

Further levels in both directions:

• Below: 1.3050, 1.30, 1.2960, 1.2835 and 1.2805
• Above: 1.31, 1.3170, 1.3240, 1.3350, 1.34

OANDA’s Open Position Ratios

The EUR/USD ratio is showing little movement in the Monday session. This is not reflected in the current movement of the pair, as the euro has lost some ground. Trader sentiment continues to be biased towards the euro continuing to drop, with a solid majority of short positions making up the ratio.

The dollar has posted gains against the euro, which again finds itself below the 1.31 line. We could see the pair continue to trade fairly quietly. This could change on Tuesday, with the release of German Economic Sentiment, a key event.

EUR/USD Fundamentals

• 9:00 Eurozone Trade Balance. Estimate 9.9B. Actual 12.0B.
• 12:30 US Empire State Manufacturing Index. Estimate 7.2 points.
• 13:00 US TIC Long-Term Purchases. Estimate 41.3B.
• 14:00 US NAHB Housing Market Index. Estimate 45 points.

*Key releases are highlighted in bold

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.