Market Overview

EUR/USD – Loses Ground After Juncker Bashes Euro

EUR/USD lost ground after negative reaction to comments by Jean-Paul Juncker, head of the Eurogroup of finance ministers. Juncker stated that the value of the euro was too high, and the currency responded by dropping below the 1.33 level. In the US, retail sales numbers were strong, but manufacturing data disappointed. It is another busy day, with a host of releases out of Europe and the US, as both release important inflation data. In Italy, the country's Trade Surplus dropped, but still came in well above expectations. Today's key release is US Core CPI.

 If Jean-Paul Juncker wanted to shake up the currency markets, he certainly didn't have to wait long. Speaking at an event in Luxemburg, the head of the Eurogroup of finance ministers bluntly stated that the value of the euro is “dangerously high”. The markets jumped on his comments, and the euro quickly headed south, falling below the 1.33 line. Still, the continental currency has looked sharp since the ECB rate decision late last week, and has shown that it can flex some muscle against the US dollar. Although the euro has enjoyed a great start to 2013, the  same cannot be said about the Eurozone, as economic data continues to look weak. Unemployment remains stubbornly high, with the Eurozone rate stuck at 11.8% and Greece and Spain reeling from 25% unemployment.

PMIs continue to point to contraction in the economy, and manufacturing numbers have been sluggish. France and Italy have imposed austerity measures to try and regain their economic footing, but any recovery promises to be slow. Even Germany, the locomotive of Europe, is in trouble, with a string of disappointing releases. If we don't see improvement in 2013, market sentiment will tumble, and likely take the euro with it.

In the US, key data continues to paint a mixed picture. Retail Sales looked sharp, rising 0.5%, and hitting a four-month high. These positive numbers were not reflected in manufacturing data, which looked very weak. The Empire State Manufacturing Index dropped -7.8 points, shocking the markets, which had anticipated a gain of 1.9 points. This important index has posted consecutive declines since July, and points to serious weakness in the US manufacturing sector.

In a speech earlier this week, Fed Reserve Chair Bernard Bernanke may have disappointed some, as he did not give any clues about when the current round of QE might end. Bernanke did little more than express his concern about the speed of the US recovery. He noted that the economy has shown signs of improvement, but he was still unsatisfied with the economy's progress. Given these sentiments, it seems unlikely that the Fed will consider ending the current round of QE in 2013, barring a spectacular recovery by the US economy during the year. Underscoring this point, the president of the San Francisco Federal Reserve Bank, John Williams, stated that he expected the Fed to continue its bond buying program “well into the second half of 2013.” Although Bernanke avoided talking about QE, he was more forthcoming with regard to the debt ceiling issue, which is likely to be a hot topic, if not a full-blown crisis, in February. The US is quickly approaching its debt limit of $16.4 trillion, and Bernanke said Congress must act and raise the debt ceiling. He further noted that tinkering with interest rates will not make much difference, but that if Congress ensures that the country's fiscal house is in order, interest rates would gradually rise as the economy improves.

EUR/USD for Wednesday, January 16, 2013

Forex Rate Graph 15/1/13

EUR/USD January 16 at 9:45 GMT
1.3375 H: 1.3318 L: 1.3262

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3130 1.3170 1.3240 1.3280 1.3350 1.34

 

EUR/USD fell in Tuesday's North American session, dropping below 1.33, but has since leveled off. Wednesday has seen little movement, as the Asian session and early European session have been quiet. The pair is putting pressure on 1.3280, the next line of the upside. The line of 1.3240 is providing weak support and could be tested if the pair's downward trend continues.

Current range: 1.3240 to 1.3280.

Further levels in both directions:

  • Below: 1.3240, 1.3170, 1.3130, 1.3080, 1.3030, 1.30 and 1.2960.
  • Above: 1.3280, 1.3350, 1.34, 1.3480, 1.3568 and 1.3627 and 1.3797.

 

OANDA's Open Position Ratios

EUR/USD ratio is again showing movement, this time towards long positions. This comes after the ratio was static over the past few days, despite the gains posted by the euro. This recent move in the ratio could signal that the pair will reverse direction and the euro will make up for some of yesterday's losses against the dollar.

After looking unbeatable for a few days, the euro has lost ground, following negative comments by the head of the Eurogroup of finance ministers. However, the euro has still posted excellent gains against the dollar in January, and the markets will quickly move onto new developments. Traders should keep an eye on today's economic news, with a host of releases out of the US and the Eurozone.

EUR/USD Fundamentals

  • 9:00 Italian Trade Balance. Estimate 1.91B. Actual 2.36B.
  • 10:00 Eurozone CPI. Estimate 2.2%.
  • 10:00 Eurozone Core CPI. Estimate 1.5%.
  • Tentative: German 10-year Bond Auction.
  • 13:30 US Core CPI. Estimate 0.2%.
  • 13:30 US CPI. Estimate 0.0%.
  • 14:00 US TIC Long-Term Purchases. Estimate 19.8B.
  • 14:15 US Capacity Utilization Rate. Estimate 78.6%.
  • 14:15 US Industrial Production. Estimate 0.2%.
  • 15:00 US NAHB Housing Market Index. Estimate 48 points.
  • 13:30 US Crude Oil Inventories. Estimate 2.0M.
  • 19:00 US Beige Book.

 

*Key releases are highlighted in bold

*All release times are GMT

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: News Forex Global Economics Markets Trading Ideas

 

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