EUR/USD – Euro Jumping after Mixed PMI Data

After uneventful trading on Wednesday, EUR/USD is showing strong volatility after a large number of releases early on Thursday. The markets cheered as PMIs out of Germany and the Eurozone looked solid. However, French PMIs were a disappointment, falling well behind market expectations. Eurozone Current Account looked very sharp, posting its largest surplus in over six years. In the US, the markets will be hoping for another strong reading from today’s highlight, Unemployment Claims. EUR/USD was trading in the 1.3320 range, as the markets digest the divergent releases.

EUR/USD was showing strong movement following as a host of PMI data from France, Germany and the Eurozone. German PMIs were excellent, as both Services and Manufacturing PMIs easily beat the market forecast. Eurozone Manufacturing PMI had its best showing since March, while Services PMI came in just above the estimate. The news was less positive from France, as both Services and Manufacturing PMIs lost ground in December, and were well below the market estimates. There was some good news from an unlikely source, as Eurozone Trade Balance hit 14.8 billion euros, easily beating the forecast of 6.5 billion euros.

After some weak releases earlier in January, this week’s German economic data has been encouraging. ZEW Economic Sentiment soared to its highest level since May 2010, and Thursday’s PMIs were sharp. Manufacturing PMI climbed to 48.8 points, its best showing since February. Services PMI looked even better, climbing to 55.3 points.  This was its highest level since May 2011. The solid readings will be welcome news, as hopes rise that the Eurozone’s largest economy is improving. In order for the Eurozone to get back on its feet, it is critical for the German locomotive to get back on track.

Trying to gauge the extent of the US economic recovery is no simple task, especially when US releases point in all directions. Last week’s unemployment claims were outstanding, and retail sales looked sharp. This was offset by weak manufacturing and consumer sentiment data. As well, the most recent housing numbers fell below the estimate. With the US economy sending mixed signals, the uncertainty is likely to be reflected in the currency markets. In Washington, there was a new development in budget negotiations, which have been stalled due to sharp disagreements between the Republicans and Democrats. The Republicans have announced that they will table a proposal in Congress which would extend the debt ceiling until April 15. This would allow the U.S. government to borrow enough money to keep it fully operating for the next three months until the sides can reach an agreement. The two sides took a short breather to celebrate President Obama’s inauguration on Monday. With the parties far apart on the issue of spending cuts and how to deal with the staggering US debt, we can expect more fireworks on Capitol Hill before the spring thaw.

EUR/USD for Thursday, January 24, 2013

EUR/USD January 24 at 10:10 GMT

1.3324 H: 1.3347 L: 1.3286

EUR/USD Technical

EUR/USD was quiet in the Asian session, but has shown a lot of movement in European trading. Despite the volatility, the proximate resistance and support lines (S1 and R1 above) remain in place. There is weak support at 1.3280, and this line could face pressure if the euro continues to lose ground. The line of 1.3170 is stronger. On the upside, 1.3350 continues rto provide resistance. Due the pair’s volatility, this line could also see activity if the euro shows any upward momentum.

Current range: 1.3280 to 1.3350.

Further levels in both directions:

• Below: 1.3280, 1.3240, 1.3170, 1.3130, 1.3080, 1.3030, 1.30 and 1.2960, 1.2835 and 1.2805.
• Above: 1.3350, 1.34, 1.3480, 1.3568 and 1.3627, 1.3797 and 1.3858.

OANDA’s Open Position Ratios

The EUR/USD ratio continues to be busy, and has shifted directions, with movement towards short positions. The euro has been moving sharply in both directions, unable to find a firm footing. The ratio activity could be a signal to expect the euro to lose ground against the US dollar. This expectation is reinforced by the fact that trader sentiment continues to be strongly biased in favor of short positions.

The euro is having a busy day, with fluctuations in both directions, following mixed PMI data out of Europe. There are more releases to come, and key employment numbers out of the US could keep the pair hopping.

EUR/USD Fundamentals

• 8:00 French Flash Manufacturing PMI. Estimate 44.9 points. Actual 42.9 points.
• 8:00 French Flash Services PMI. Estimate 45.6 points. Actual 43.6 points.
• 8:00 Spanish Unemployment Rate. Estimate 25.9%. Actual 26.0%.
• 8:30 German Flash Manufacturing PMI. Estimate 47.1 points. Actual 48.8 points.
• 8:30 German Flash Services PMI. Estimate 52.0 points. Actual 55.3 points.
• 9:00 Eurozone Current Account. Estimate 6.5B. Actual 14.8B.
• 9:00 Eurozone Flash Manufacturing PMI. Estimate 46.6 points. Actual 47.5 points.
• 9:00 Eurozone Flash Services PMI. Estimate 48.1 points. Actual 48.3 points.
• 9:00 Italian Retail Sales. Estimate 0.2%. Actual -0.4%.
• 13:30 US Unemployment Claims. Estimate 359K.
• 14:00 Belgium NBB Business Climate. Estimate -10.9 points.
• 14:00 US Flash Manufacturing PMI. Estimate 53.2 points.
• 15:00 US CB Leading Index. Estimate 0.4%.
• 15:30 US Natural Gas Storage.
• 16:00 US Crude Oil Inventories. Estimate 2.8M.

*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.