EUR/USD – Higher as Markets Wait for US Employment Numbers

EUR/USD has moved higher in Thursday trading, as the pair trades in the mid-1.30 range. The markets were treated to bad news out of Spain, as the Unemployment Rate hit a new record of 27.2%. In the US, the bad news continued as Core Durable Goods looked weak. Today’s highlight is US Unemployment Claims, and the markets will be hoping that this market-mover beats expectations.

German releases have had a dismal week, and this is putting pressure on the euro. The euro took it on the chin on Tuesday, dropping sharply as German PMIs missed their estimates. Manufacturing PMI dropped from 48.9 points to 47.9 points, a four-month low. It was well short of the estimate of 49.0 points. Services PMI fared even worse, falling from 51.6 points to 49.2 points. This was well short of the estimate of 51.1 points. This meant that both PMIs were below the 50 level, indicating contraction in the services and manufacturing sectors. On Wednesday, German IFO Business Climate dropped sharply, from 106.7 points to 104.4. This was way off the estimate 1.06.4 points. The Eurozone continues to stagnate, and has little chance of improving if Germany, the most powerful economy on the continent, doesn’t take the lead. The weak figures we are seeing out of the Eurozone has increased speculation of an interest rate cut by the ECB, which meets next on May 2.

In Italy there was a positive development in the political crisis, as Enrico Letta was nominated as prime minister. Italy has been in a political impasse since inconclusive elections in February, and the impasse in the Eurozone’s third largest economy threatened to undermine the shaky Eurozone. Letta’s Democratic Party does not have a parliamentary majority, so he will have to form a coalition, which is no simple task. Letta is considered a moderate, is expected to try and form an alliance with former PM Silvio Berlusconi.

Over in the US, the streak of weak key releases continues. Since late March, almost all key releases have missed expectations. The bad news continued on Wednesday, as Core Durable Goods declined by 1.4%. This was well below the estimate of a 0.5% gain. The markets are concerned about the pace and extent of the US recovery, and await the release of Unemployment Claims, one of the most important economic indicators, later today.

EUR/USD for Thursday, April 25, 2013

1.3070 H: 1.3076 L: 1.3014

EUR/USD Technical

EUR/USD has gained ground in the European session. The pair is receiving support at the 1.3050 line. This line is weak, and could be tested if the euro gives back some of today’s gains. There is resistance at the round number of 1.31. On the downside, 1.3000 is providing support. This line has strengthened as the pair trades at higher levels. The next support level is at 1.2960.

• Current range: 1.3050 to 1.31

Further levels in both directions:

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

OANDA’s Open Position Ratios

The EUR/USD ratio is back in action after a lull on Wednesday. The ratio is pointing to movement in the direction short positions. We are not seeing this reflected in the movement of the pair, as the euro has posted gains against the US dollar.  However, it may be a sign that a correction will take place and the dollar will recover some of today’s losses.

Despite weak Spanish employment data, the euro is pushing ahead. Will the upward movement continue? The markets are waiting for US Unemployment Claims, and this indicator is often a market-mover. So we are likely to see further movement from the pair during the day.

EUR/USD Fundamentals

• 7:00 Spanish Unemployment Rate. Estimate 26.5%. Actual 27.2%.
• 12:30 US Unemployment Claims. Estimate 352K.
• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Natural Gas Storage. Estimate 33B.

*Key releases are highlighted in bold

*All release times are GMT

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