EUR/USD – Edges Higher after Weak US Numbers

EUR/USD is steady in Friday’s European session, trading in the low 1.28 range. The pair has endured a rough week, but the euro was helped by weak US data on Thursday, as employment and GDP numbers missed expectations. In Cyprus, banks across the country reopened for the first time in almost two weeks, thankfully without incident. In economic news, French Consumer Spending was well off the estimate. In the US, Friday’s highlight is the UoM Consumer Sentiment. US releases have had a very disappointing week, and the markets will be hoping to wrap up this week on a bright note.

The Cyprus bailout crisis, which has spooked markets across the globe, appears to have receded. There was calm as country’s banks reopened on Thursday, after being closed for the past two weeks. Fearing a bank run, the government has imposed strict capital controls, including limiting withdrawals to 300 euros a day, and a ban on cashing checks. Under the EUR10 billion bailout agreement, all bank deposits under 100,000 euros will continue to be insured. As well, under the agreement, Deposits above this amount will be taxed, but details have not been released. Laiki, one of the country’s biggest banks, will be shut down. The original bailout agreement provided for a tax on all Cypriot bank deposits, and this had fueled fears that bank deposits could be taxed or seized in any EU country. Although this tax grab was quickly shelved after a huge outcry in Cyprus, the damage to investor confidence will certainly take time to repair.

Mario Draghi, the head of the ECB, has practically promised that the Eurozone economy will improve later in 2013, but that certainly won’t happen if the German economy doesn’t get back on track. However, German data has been a mix recently, as underscored in Thursday’s releases. Retail Sales rose 0.5%, blowing past the estimate of a 0.4% decline. At the same time, Unemployment Change hit a five-month high, jumping to 13 thousand. This was a major disappointment, as the markets had anticipated a respectable drop of 2 thousand.

There has been a lot of talk of the US recovery gaining traction, but this week has been a bust, as economic releases pointed to weakness in a wide range of sectors in the US economy. There were two major housing releases this week, and hopes of strong numbers were dashed. New Home Sales fell sharply from 437 thousand to 411 thousand, well below expectations. Pending Home Sales, also looked weak, declining 0.4%. The forecast stood at -0.3%. Unemployment Claims have looked sharp over the past four weeks, but slumped this time around, coming in at 357 thousand, well above the estimate of 340 thousand. Final GDP rose 0.4%, missing the forecast of 0.5%. Earlier in the week, manufacturing and consumer confidence also missed their estimates. Put simply, this has been a week has been one that the markets will be happy to forget.

EUR/USD for Friday, March 29, 2013

1.2817 H: 1.2837 L: 1.2794

EUR/USD Technical

EUR/USD has crossed back above the 1.28 line in the European session. The pair is receiving support at 1.2805. This is a weak line, and could be tested if the euro loses any ground. There is stronger support at 1.2757. On the upside, 1.2880 is providing resistance. This is followed by the resistance line of 1.2950.

Current range: 1.2805 to 1.2880

Further levels in both directions:

• Below: 1.2805, 1.2757, 1.2689, 1.2624, 1.2495
• Above: 1.2880, 1.2950, 1.3000 and 1.3080

OANDA’s Open Position Ratios

After showing little movement for most of the week, EUR/USD ratio is pointing to an increase in short positions. This is not consistent with the pair’s current movement, as the euro has posted modest gains against the US dollar in the European session. Continued movement in the ratio in this direction indicates an expectation for the US dollar to post gains against the euro.

After a rough week, the euro is pointing upwards, and has crossed back above the 1.28 line. The temperature in the Cyprus crisis has gone lower, which has helped the euro. With no major releases out of Europe or the US on Friday, we could see the pair remain fairly quiet right into the weekend.

EUR/USD Fundamentals

• 7:45 French Consumer Spending. Estimate 0.3%. Actual -0.2%
• 10:00 Italian Preliminary CPI. Estimate 0.3%. Actual 0.3%
• 12:30 US Core PCE Price Index. Estimate 0.1%
• 12:30 US Personal Spending. Estimate 0.6%
• 12:30 US Personal Income. Estimate 1.0%
• 13:55 US Revised UoM Consumer Sentiment. Estimate 73.2 points
• 13:55 US Revised UoM Inflation Expectations

*Key releases are highlighted in bold

*All release times are GMT

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