EUR/USD – Fluctuating After More Weak German Numbers

The euro is having a busy Wednesday, dropping against the US dollar, only to recoup those losses. The pair fell after Germany released another weak event, the third in the past two days. EUR/USD dropped below the 1.30 level in the Asian session, but has since recovered. This time the culprit was German IFO Business Climate, which fell well below expectations. Italian Retail Sales also looked weak, missing the estimate. In the US, the markets were pleased as New Home Sales came in just above the estimate. Today’s key event is US Core Durable Goods Orders.

German numbers 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. Meanwhile, 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.

Over in the US, we’ve been treated to a long and unwanted streak of weak key releases. There wasn’t any good news from Existing Home Sales, which came in at 492 million, well off the estimate of 5.02 million. However, New Home Sales cheered up the markets with a solid release on Wednesday. The indicator climbed from 411 thousand to 417 thousand, edging past the estimate of 416 thousand. The markets will be hoping that the good news continues on Wednesday, with the release of key manufacturing data.

There was little surprise that the G20 did not take Japan to task over its monetary policies, which have resulted in the yen taking a tumble. G20 final statements tend not to criticize its members, and this meeting was no exception. Although there has been a lot of criticism leveled against Japan, the G20 issued a very soft statement about currency devaluation which made no mention Japan, giving it a green light to continue its aggressive easing measures. Finance Minister Taro Aso has insisted that the measures are aimed at stamping out deflation, and the yen’s plunge is a “byproduct”. With the BOJ moving full steam ahead in its fight against deflation, traders can expect the Japanese currency to continue to weaken.

 EUR/USD for Wednesday, April 24, 2013

1.3018 H: 1.3020 L: 1.2956

EUR/USD Technical

EUR/USD lost ground in the Asian session, dipping below the 1.30 line. In the European session, the pair recovered, and has pushed back above 1.30. The pair is receiving support at the 1.30 line. Given the fluctuations we are seeing, this line could continue to be tested. There is stronger support at 1.2960. On the upside, 1.3350 is providing resistance. This  is followed by resistance at the round number of 1.31.

• Current range: 1.3000 to 1.3050

Further levels in both directions:

• Below: 1.3000, 1.2960, 1.2880, 1.2777 and 1.2697
• Above: 1.3050, 1.31, 1.3170 and 1.3240

OANDA’s Open Position Ratios

The EUR/USD ratio is not showing any movement in Wednesday trading. Although the pair has fluctuated, we have not seen much net movement, as the pair trades close to the 1.30 line. Trader sentiment continues to be strongly biased in favor of short positions, indicative of an expectation that the dollar will post more gains against the euro.

The euro remains under pressure, in large part due to weak German releases this week. With the US releasing key manufacturing data later in the day, we could see the pair continue to fluctuate as the euro struggles to find its footing.

EUR/USD Fundamentals

• 8:00 German IFO Business Climate. Estimate 106.4 points. Actual 104.4 points.
• 8:00 Italian Retail Sales. Estimate 0.4%. Actual -0.2%.
• 9:33 German 30-year Bond Auction. Actual 2.16%.
• 12:30 US Core Durable Goods Orders. Estimate 0.5%.
• 12:30 US Durable Goods Orders. Estimate -2.9%.
• 13:00 Belgium NBB Business Climate. Estimate -14.3 points.
• 13:30 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Crude Oil Inventories. Estimate 1.8M.

*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.