EUR/USD – Euro Keeps Rolling, Climbs Above 1.35

The euro continues to rise against the US dollar, as EUR/USD was trading in the 1.3530 range. The markets are waiting for the Federal Reserve announcement later on Wednesday. US consumer confidence numbers continue to wane, as CB Consumer Confidence fell to its lowest level in over a year. In Europe, Spanish GDP was a disappointment, dropping to its lowest level since 2009. The Italian 10-year Bond Auction will be released later in the day. In the US, the markets will have their hands full, as there are three key releases – ADP Non-farm Employment Change, Advance GDP and the FOMC Statement.

The euro continues to fly high, and has now climbed above the 1.35 line, its highest level since December 2011. The continental currency has had a stellar month, and has risen over 500 points since early January. The euro has been boosted by improving German data, as well as optimistic forecasts about the Eurozone economy from ECB President Mario Draghi and others. These officials acknowledge that the Eurozone is going through a tough time, but are confident that the economy will bounce back later in 2013. Although a range of indicators, notably employment and PMI numbers, point to a deepening recession and continuing fallout from the debt crisis, the euro continues to sparkle, at least for now.

The markets will be closely monitoring Wednesday’s Federal Reserve Statement, as the Fed wraps up an important two-day policy meeting.  The Fed continues to do its best to bolster the bumpy recovery, and increased its purchases of securities in January from $40 billion to $85 billion. This has pushed the Fed’s balance sheet to a record $3 trillion. Despite these measures, the US recovery remains slow, and unemployment is still high at 7.8%. Minutes from the most recent FOMC pointed to members being divided between those in favor of ending QE in mid-2013, versus those who wish to continue it to a later date. When the Fed implemented the most recent round of QE, it stated that it would continue until unemployment fell to 6.5%. Most analysts are predicting that the Fed will reaffirm this stance at the conclusion of today’s meeting.

US numbers continue to point in all directions, much to the consternation of the markets. Recent employment and retail sales numbers have been very positive, but this has been offset by weak housing and manufacturing data. Consumer confidence is also on the wane, as underscored by Tueday’s CB Consumer Confidence release. The key indicator dropped sharply to 58.6 points, its worst showing in over a year. The markets had expected a much higher reading of 64.8 points.  We may get a better idea of the health of the US economy with the release of GDP on Wednesday. The markets are bracing for a relatively weak reading, with an estimate of a 1.1% gain. If the key indicator surprises the markets, we could see a reaction from EUR/USD.

EUR/USD for Wednesday, January 30, 2013

EUR/USD January 30 at 10:30 GMT

1.3542 H: 1.3544 L: 1.3482

EUR/USD Technical

EUR/USD is on the march, as the pair has crossed above 1.35. There is weak support at 1.3536. 1.3480 is a stronger support level. On the upside, 1.3627 is providing resistance to the surging pair. This line has has held firm since November 2011.

Current range: 1.3536 to 1.3627.

Further levels in both directions:

• Below: 1.3536, 1.3480, 1.34, 1.3350, 1.3280, 1.3240 and 1.3170.
• Above: 1.3627, 1.3690, 1.3745 and 1.3858.

OANDA’s Open Position Ratios

After little movement on Tuesday, the EUR/USD ratio is busy, showing strong movement towards long positions. This reflects what we are seeing from the currency pair, as the euro continues to push hard against the US dollar. If EUR/USD continues to be active, we can expect further movement in the ratio.

The euro continues on its winning ways after a short break, and has easily broken through the 1.35 line. Will the upward momentum continue?  There are several key releases out of the US on Wednesday, including an announcement from the Federal Reserve. Any unexpected developments could shake up the markets and impact on EUR/USD.

EUR/USD Fundamentals

• 8:00 Spanish Flash GDP. Estimate -0.6%. Actual -0.7%.
• 9:10 Eurozone Retail PMI. Actaul 45.9 points.
• 10:11  Italian 10-year Bond Auction. Actual 4.17%.
• 10:34 German 30-year Bond Auction. Actual 2.45%.
• 13:15 US ADP Non-Farm Employment Change. Estimate 164K.
• 13:30 US Advance GDP. Estimate 1.1%.
• 13:30 US Advance GDP Price Index. Estimate. 1.5%.
• 15:30 US Crude Oil Inventories. Estimate 2.9M.
• 18:00 German Deutsche Bundesbank President Jens Weidmann Speaks.
• 19:15 US FOMC Statement.
• 19:15 US Federal Funds Rate. Estimate <0.25%.

*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.