EUR/USD – Euro Edges Lower as Markets Remain Jittery

The euro continues to struggle, as the pair lost over a cent on Thursday, and has edged down further in Friday trading. EUR/USD was trading in the mid-1.30 range. The fallout from the Italian parliamentary election shows no sign of abating. With no clear winner emerging from the vote, and Italian political leaders showing little inclination to set aside their differences and work with each other, the markets remain concerned that a prolonged political stalemate could hurt the shaky Italian economy and reignite a new crisis in the Eurozone. In economic news, it’s a busy day, with a host of releases out of the Eurozone and the US. There was good news out of Germany, as Retail Sales produced its strongest gain since 2008. Eurozone Unemployment Rate was as disappointment, climbing to 11.9%. In the US, Friday’s key release is ISM Manufacturing PMI.

The shockwaves from the election in Italy have rapidly spread beyond Italy, and Eurozone politicians are trying to put a brave face on the surprising results. In Germany, Foreign Minister Guido Westerwelle called on Italy to form a stable government as quickly as possible. Westerwelle noted that the entire Eurozone was “in the same boat” with regard to the debt crisis, and cooperation between the Eurozone members was essential. French Finance Minister Pierre Moscovici tried to sound reassuring, stating that the results did not threaten stability in the Eurozone, but at the same time, it was essential that Italy gets its act together and form a new government. However, Spain’s foreign minister, Jose Garcia-Margallo did not hide his pessimism, warning that the election results could have dire consequences for both Italy and Europe. As the third largest economy in the Eurozone, the crisis in Italy has rattled markets worldwide, and the euro could take a tumble if a divided Italy doesn’t get its act together in a hurry.

With the markets glued to developments in Italy this week, US economic data was pushed to the sidelines. However, the economic news out of the US was generally positive. CB Consumer Confidence and New Home Sales both looked very sharp. There was also good news from the US manufacturing industry, as the Richmond Manufacturing Index hit 6 points, easily beating the forecast of -4. Core Durable Goods Orders jumped 1.9%, while Pending Home Sales gained a strong 4.5%. Both key releases were well above expectations. The fly in the ointment was GDP, which posted a negligible gain of 0.1%, missing the estimate. The poor reading raises concerns about the health of the US economy. Unemployment Claims dropped nicely, easily beating the forecast. All in all, US releases were positive, and the markets will be hoping that the good news continues into March.

EUR/USD for Friday, Mar 1, 2013

EUR/USD March 1 at 10:50 GMT

1.3040 H: 1.3101 L: 1.3022

EUR/USD Technical

EUR/USD remains under pressure, as the pair struggles in the mid-1.30 range. The pair is now within striking distance of the all-important number of 1.30, which is the next line of support. This line has held firm since late December 2012, but could be tested if the pair’s downward momentum continues. On the upside, 1.3080 is the next line of resistance. This is followed by resistance at 1.3130. This line has strengthened as the pair trades at lower levels. 

Current range: 1.30 to 1.3080.

Further levels in both directions:

• Below: 1.30, 1.2950, 1.2882 and 1.2802
• Above: 1.3080, 1.3130, 1.3170, 1.3280, 1.3350 and 1.34

OANDA’s Open Position Ratios

The EUR/USD ratio is showing sharp movement towards long positions. This activity is not reflected in the current movement by the pair, as the euro has edged lower in Friday trading, continuing the pair’s downward momentum. Traders should note that the ratio has been showing strong fluctuations this week, and is almost evenly split between long and short positions. This indicates that trader sentiment is evenly split as to what direction the pair will take.

The euro continues to struggle, as the fallout from the inconclusive Italian elections continues to spook the markets. The currency has lost over a cent in the past 24 hours, and we could see the downward momentum continue. Look for the crucial 1.30 level to face more pressure from the slumping pair.

EUR/USD Fundamentals

• 1:00 US FOMC Member Charles Evans Speaks.
• 7:00 German Retail Sales. Estimate 1.1%. Actual 3.1%.
• 8:15 Spanish Manufacturing PMI. Estimate 46.3 points. Actual 46.8 points.
• 8:45 Italian Manufacturing PMI. Estimate 47.6 points. Actual 45.8 points.
• 9:00 Eurozone Final Manufacturing PMI. Estimate 47.8 points. Actual 47.9 points.
• 9:00 Italian Monthly Unemployment Rate. Estimate 11.1%. Actual 11.7%.
• 9:00 Italian Quarterly Unemployment Rate. Estimate 10.8%. Actual 11.2%.
• 10:00 Eurozone CPI Flash Estimate. Estimate 2.0%. Actual 1.8%.
• 10:00 Eurozone Unemployment Rate. Estimate 11.8%. Actual 11.9%.
• 10:00 Italian Preliminary CPI. Estimate 0.3%. Actual 0.1%.
• 13:30 US Core PCE Price Index. Estimate 0.1%.
• 13:30 US Personal Spending. Estimate 0.2%.
• 13:30 US Personal Income. Estimate -2.3%.
• 14:00 US Final Manufacturing PMI. Estimate 55.2 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 76.3 points.
• 14:55 US Revised UoM Inflation Expectations.
• 15:00 US ISM Manufacturing PMI. Estimate 52.7 points.
• 15:00 US Construction Spending. Estimate 0.6%.
• 15:00 US ISM Manufacturing Prices. Estimate 57.3 points.
• All Day: US Total Vehicle Sales. Estimate 15.1M.
• Saturday, 3:00 Fed Chairman Bernard Bernanke Speaks.

*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.