EUR/USD – Euro Higher to Start Off Week

EUR/USD couldn’t say goodbye to last week fast enough, as the pair posted sharp losses late last week. The euro has reversed direction on Monday, moving up to the mid-1.28 range in Monday’s European session. The euro lost ground on Thursday after Mario Draghi’s dovish remarks, and dropped further on Friday after strong US employment data. In economic releases, German Trade Balance dropped to a thirteen-month low, and Eurozone Sentix Investor Confidence fell below expectations. Brussels will  be buzzing on Monday, as the Eurozone finance ministers meet in Brussels, and Mario Draghi addresses a European parliamentary committee. In the US, it’s a quiet start to the week, with only a single release on the schedule.

As expected, the ECB did not adjust the 0.50% interest rate at its policy meeting last week, but the euro still took a hit. The reason? Mario Draghi was quite dovish when speaking at a press conference following the rate announcement. Draghi reiterated that the ECB’s monetary policy would remain accommodative as long as needed, and didn’t sound positive about growth in the Eurozone. Predictably, his comments did not inspire the markets, and the euro lost over a cent against the dollar on Thursday.

The US dollar is enjoying broad strength against the major currencies, thanks to a solid Non-Farm Payrolls release on Friday. The key indicator hit a four-month high, posting 200 thousand new jobs. This was well above the estimate of 163 thousand. Earlier in the week, Unemployment Claims came in just below the estimate. The unemployment rate was unchanged at 7.6%. There are two factors here which have contributed to the dollar’s strength. First, last week’s strong employment data points to an improving US economy. Second, there is increased likelihood that the Federal Reserve could taper QE, which would be a dollar-positive event.

Eurozone financial ministers are meeting in Brussels on Monday, and will be discussing whether to transfer the next installment of aid to Athens. Eurozone officials have expressed dissatisfaction with the lack of progress by the Greek government in implementing the bailout conditions, including budget cut shortfalls and cuts to the bloated public service. The next tranche of bailout funds amounts to EUR 8.1 billion, but these funds will not be delivered before the troika gives the go-ahead. The Eurogroup could decide to transfer smaller installments rather than the entire 8.1 billion, with each portion conditional on Greece meeting specific milestones in return for more aid.

EUR/USD for Monday, July 8, 2013

EUR/USD 1.2856 H: 1.2858 L: 1.2812

EUR/USD Technical

EUR/USD has rebounded on Monday, as the pair trades in the mid-1.28 range . The pair is receiving support at 1.2844. This is a weak line, and could see further action on Monday. This is followed by a strong support level at 1.2751. This line has held firm since early April . On the upside, the pair faces resistance at 1.2943. This is followed by the important line of 1.3000, which has strengthened as the pair trades as lower levels.

• Current range: 1.2844 to 1.2943

Further levels in both directions:

• Below: 1.2844, 1.2751 and 1.2696 and 1.2586
• Above: 1.2943, 1.3000, 1.3050, 1.3100, 1.3162 and 1.3271

OANDA’s Open Positions Ratio

The EUR/USD ratio has picked up where it left off on Friday, pointing to movement towards long positions. This is consistent with what we are seeing from the pair, as the euro is posting gains on Monday. The ratio is now made up of a majority of long positions, reflecting trader bias towards the euro continuing to improve.

EUR/USD took a hit late last week, but has reversed direction in the Monday session. There is only one US release today, and it is a minor event. So we could be in for quiet start to the week, as the pair trades in the mid-1.28 range.

EUR/USD Fundamentals

• 6:00 German Trade Balance. Estimate 17.4B. Actual 14.1B.
• 8:30 Eurozone Sentix Investor Confidence. Estimate -11.5 points. Actual -12.6 points.
• All Day – Eurogroup Meetings.
• 10:00 German Industrial Production. Estimate. -0.5%.
• 12:30 ECB President Mario Draghi Speaks.
• 19:00 US Consumer Credit. Estimate 13.2B.

*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.