EUR/USD – Testing 1.33 as Markets as Eurozone Unemployment Numbers Improve

The euro is putting pressure on the 1.33 line in Wednesday’s European session, but has not been able to push above this barrier. Wednesday has plenty of releases on the schedule, with major events from both the Eurozone and the US. So we could see some volatility from the pair as a result. In today’s Eurozone releases, German numbers were a mixed bag. Retail Sales sagged but Unemployment Change looked sharp. French Consumer Spending was not impressive, posting a four-month low. There was better news on the employment front, as Eurozone and the Italian unemployment rates met expectations. In the US, there are three key releases later today – ADP Non-Farm Employment Change, Advance GDP and the Federal Reserve’s FOMC Policy Statement.

The markets are getting a good look at German economic numbers, with four German releases so far this week. The releases have been mostly positive, pointing to some improvement in the Eurozone’s largest economy. Earlier in the week, GfK Consumer Climate rose to 7.0 points, its highest level in six years. On the inflation front, Preliminary CPI posted a solid gain of 0.5%. Unemployment Change looked sharp, dropping by 7 thousand, much lower than the estimate of -1 thousand. The spoiler was German Retail Sales, which declined by 1.5%, its worst showing since January. With general elections in Germany scheduled for September, every economic release has added significance and will be under the microscope during the election campaign.

In Spain, we are seeing some better numbers from Eurozone’s fourth largest economy. The unemployment rate in June dropped from 27.2% to 26.3%. This marked the first monthly decline since July 2011, when the unemployment rate was around 21%. On Tuesday, Flash GDP pointed upwards. The key indicator posted a modest decline of -0.1% for Q1. This was the best result since late 2011. If additional releases point upwards, this would be excellent news for the long-suffering economy and could bolster the euro as well.

The ECB will be in the spotlight on Thursday, as the central bank sets the new benchmark interest rate. However, it is the accompanying press conference with ECB head Mario Draghi, that has moved the markets in recent months. Will Draghi again make some comments that affect the euro? Analysts are betting that the rate will remain the same, as rates are already so low that a reduction would not have a strong impact. The ECB has hinted that it is considering non-conventional monetary measures, such as negative deposit rates and forward guidance. If Draghi mentions that the ECB is considering these steps, we could see the euro point downwards.

EUR/USD for Wednesday, July 31, 2013

EUR/USD 1.3272 H: 1.3300 L: 1.3241

EUR/USD Technical

EUR/USD is again testing resistance at 1.3275. The pair showed some momentum earlier in European trade, and touched a high of 1.33, but was unable to hold onto these gains and has retracted. The round number of 1.34 is the next line of resistance. On the downside, the pair continues to receive strong support at 1.3162. This is followed by support at 1.31.

• Current range: 1.3162 to 1.3275

Further levels in both directions:

• Below: 1.3162, 1.3100, 1.3050, 1.3000 and 1.2943
• Above: 1.3275, 1.34, 1.3476, 1.3585 and 1.3649

OANDA’s Open Positions Ratio

EUR/USD ratio shifted directions from what we saw on Tuesday and is pointing to movement towards short positions. This is consistent with what we are seeing from the pair during Wednesday’s European session, as the euro has posted limited losses after failing to break past the 1.33 line. Short positions make up a very substantial majority of the open positions, indicating a strong trader bias to the US dollar making inroads against the euro.

EUR/USD is steady in Wednesday trading. The 1.33 line has proven to be a tough nut to crack – will the pair have better luck today? With the US releasing several key releases later in the day, we could see some increased activity from EUR/USD.

EUR/USD Fundamentals

• 6:00 German Retail Sales. Estimate 0.1%. Actual -1.5%.
• 6:45 French Consumer Spending. Estimate 0.1%. Actual -0.8%.
• 7:55 German Unemployment Change. Estimate -1K, Actual -7K.
• 8:00 Italian Monthly Unemployment Rate. Estimate 12.3%. Actual 12.1%.
• 9:00 Eurozone CPI Flash Estimate. Estimate 1.6%. Actual 1.6%.
• 9:00 Eurozone Unemployment Rate. Estimate 12.2%. Actual 12.1%.
• 9:00 Italian Preliminary CPI. Estimate 0.3%. Actual 0.0%.
• Tentative – German 30-year Bond Auction.
• 12:15 US ADP Non-Farm Employment Change. Estimate 179K.
• 12:30 US Advance GDP. Estimate 1.1%.
• 12:30 US Advance GDP Price Index. Estimate 1.1%.
• 12:30 US Employment Cost Index. Estimate 0.4%.
• 13:45 US Chicago PMI. Estimate 53.7 points.
• 14:30 US Crude Oil Inventories. Estimate -21.M.
• 18:00 US FOMC Statement.
• 18:00 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.