EUR/USD – Almost Unchanged Ahead of ECB Decision

EUR/USD is showing very little movement in Thursday trading, as the markets await the ECB rate announcement. The pair was trading in the high-1.31 range in the European session. There is anticipation in the air as most analysts are betting that the ECB will lower rates later on Thursday. In the US, the Federal Reserve took no new action. US releases failed to impress on Wednesday, as ADP Non-Farm Payrolls and ISM Manufacturing PMI missed their estimates. Back in the Eurozone, Spanish Manufacturing PMI came in as expected, while Italian Manufacturing PMI beat the forecast. There are two key events out of the US today – Trade Balance and Unemployment Claims.

Will he or won’t he? This question is looming large, as the markets anxiously wait to see whether Mario Draghi and his colleagues at the ECB will press the trigger and lower in interest rates for the first time since last July. The markets are expecting the ECB to lower rates from 0.75%  to 0.50%. The Eurozone continues to stagnate with poor releases, as highlighted by a record high for Eurozone Unemployment Rate, which edged to 12.1%, up from 12.0%. Whether the ECB takes action or leaves the rate as is, we could be in for some volatility from the euro later today.

Anyone who was expecting some dramatic news out of the Fed on Wednesday was sorely disappointed. The FOMC policy statement on Wednesday said little, as the Fed basically noted that it wasn’t willing to take further steps, despite signs of weakness in the US economy. There was no indication that the Fed would make any changes (higher or lower) to its current QE program of purchasing $85 billion in assets each month. The Fed did criticize the government’s economic policy, stating that current fiscal policy was restraining economic growth. Meanwhile, the continues to struggle with weak numbers, and Wednesday’s ADP Non-Farm Payrolls was a bust. The key indicator dropped to 119 thousand, nowhere near the forecast of 154 thousand. We’ll get a better picture of the US employment picture as the US releases Unemployment Claims on Thursday, followed by official US Non-Farm Payrolls on Friday.

The markets were delighted that Italy has finally put together a government, and Italian releases have looked solid this week. Although the new government will have to deal with a troubled economy, there were some hopeful signs. Italian 10-year bonds fell, dropping below 4%. This is an important sign of renewed investor confidence in the Italian economy. There was more good news as the Italian Monthly Unemployment Rate nudged lower, from 11.6% to 11.5%. This beat the estimate of 11.7%. On Thursday, Italian Manufacturing PMI came in at 45.5 points, beating the estimate of 44.9 points. Strong releases out of the Eurozone’s third largest economy will give a lift to both the Eurozone and the euro.

EUR/USD for Thursday, May 2, 2013

1.3163 H: 1.3183 L: 1.3149

EUR/USD Technical

EUR/USD is unchanged in Thursday trading, as the markets are cautious before the ECB announcement. The pair is receiving support at the round number of 1.3100. This is followed by a support level at 1.3050. On the upside, the pair is testing 1.3170. There is stronger resistance at 1.3240.

• Current range: 1.3100 to 1.3170

Further levels in both directions:

• Below: 1.31, 1.3050, 1.3000, 1.2960 and 1.2880
• Above: 1.3170, 1.3240, 1.3306, 1.3398 and 1.3479

OANDA’s Open Position Ratios

The EUR/USD ratio is unchanged in Thursday trading. This is reflected in the pair’s current lack of movement. Short positions command a strong majority, indicative of a strong trader bias toward the dollar reversing direction and moving higher.

EUR/USD is looking very subdued, but this could change very quickly as the ECB sets interest rate levels. The US will be releasing key employment data later, so we can expect some movement from the pair during the day.

EUR/USD Fundamentals

• 7:15 Spanish Manufacturing PMI. Estimate 44.6 points. Actual 44.7 points.
• 7:45 Italian Manufacturing PMI. Estimate 44.9 points. Actual 45.5 points.
• 8:00 Eurozone Final Manufacturing PMI. Estimate 46.5 points. Actual 46.7 points.
• 9:00 French 10-year Bond Auction. Actual. 1.81%.
• 11:30 US Challenger Job Cuts.
• 11:45 ECB Minimum Bid Rate. Estimate 0.50%.
• 12:30 ECB Press Conference.
• 12:30 US Trade Balance. Estimate -42.1B.
• 12:30 US Unemployment Claims. Estimate 346K.
• 12:30 US Preliminary Non-Farm Productivity. Estimate 1.8%.
• 12:30 US Preliminary Unit Labor Costs. Estimate 0.8%.
• 14:30 US Natural Gas Storage. Estimate 27B.

*Key releases are highlighted in bold

*All release times are GMT

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