EUR/USD - Rangebound As Markets Eye U.S. Housing Release

 |  Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

EUR/USD is almost unchanged as we start the new week. The pair has picked up where it ended last week, trading just above the 1.38 line in Monday's European session. On Friday, U.S. releases were a big disappointment, as Core Durable Goods Orders posted its third consecutive decline, while UoM Consumer Sentiment slid to a ten-month low. It's a quiet start to the week, with no releases out of the eurozone. Today's major release is U.S. Pending Home Sales.

Last week ended on a disappointing note as key U.S. releases posted declines. Core Durable Goods Orders dropped -0.1%, well below the estimate of a 0.6% gain. This was the third straight decline for the indicator. Durable Goods Orders looked much better, posting a strong gain of 3.7%. UoM Consumer Sentiment couldn't find its footing, dropping from 77.5 to 73.2 points, its weakest showing in 2013. The estimate stood at 78.2 points. If we don't see stronger releases out of the U.S. this week, the euro could post further gains against the struggling dollar.

US employment releases did not look sharp last week, continuing to raise concerns about the health of the U.S. economy. On Thursday, Unemployment Claims came in at 350 thousand, above the estimate of 343 thousand. This weak figure came on the heels of Non-Farm Payrolls, which slipped to a six-month low. The U.S. unemployment rate dipped to 7.2%, a five-year low, but this does not point to increased employment, as the participation rate remained at 63.8%, its lowest level since 1978. These figures indicate that the U.S. labor market continues to have difficulty creating new jobs. The weak readings are putting pressure on the U.S. dollar, which finds itself at two-year lows against the euro.

Euro PMIs were weak across the board last week. PMI numbers out of Germany, France and the eurozone all fell short of their estimates and most posted a drop compared to the previous release. However, all except French Flash Manufacturing PMI remained above the 50 level, pointing to slight expansion. The latter has been below the 50 level since January 2012, indicating ongoing contraction in the French manufacturing sector.

The U.S. government is again functioning and a default has been averted, but the recent agreement hammered out in Congress provides short-term relief only, as it raises the debt ceiling until early February and funds the government until mid-January. The underlying budgetary issues remain unresolved, consumer confidence has been shaken and employment numbers are not looking good, as we saw last week. Given this situation, the Fed is unlikely to reduce QE until early 2014, perhaps as late as March or April.

EUR/USD for Monday, October 28, 2013

Forex Rate Graph 21/1/13

EUR/USD October 28 at 10:25 GMT

EUR/USD 1.3807 H: 1.3818 L: 1.3797

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3585 1.3649 1.3786 1.3893 1.4000 1.4143
Click to enlarge
  • EUR/USD is very quiet in Monday trading, as the pair trades close to the 1.38 line.
  • On the downside, 1.3786 is providing support. This weak line could be tested if the dollar shows any upward movement. This is followed by strong support at 1.3649.
  • EUR/USD faces resistance at 1.3893. This is followed by resistance at the key 1.40 line, which has held firm since October 2011.
  • Current range: 1.3786 to 1.3893

Further levels in both directions:

  • Below: 1.3786, 1.3649, 1.3585, 1.3500 and 1.3410
  • Above: 1.3893, 1.4000, 1.4143 and 1.4247

OANDA's Open Positions Ratio

EUR/USD ratio continues to indicate no change. This is consistent with the pair's lack of movement on Monday. The ratio continues to be dominated by short positions, indicating a strong trader bias towards the U.S. dollar moving higher against the euro.

EUR/USD remains at high levels, as the pair trades above the 1.38 line. With the U.S. releasing key housing data later in the day, we could see some movement from the pair in the North American session.

EUR/USD Fundamentals

  • 13:15 U.S. Capacity Utilization Rate. Exp. 78.1%.
  • 13:15 U.S. Industrial Production. Exp. 0.5%.
  • 14:00 U.S. Pending Home Sales. Exp. 0.5%.

*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.