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  • Euro May See Some Consolidation Against The U.S. Dollar 0 comments
    Feb 4, 2013 12:56 AM

    The Euro/Dollar pair had touched 1.3711 after breaking over the critical 1.3486 resistance and then the psychological level of 1.3500. Some consolidation from there saw it closing at 1.3640 for the last week. Such a strong momentum indicate that the pair my try to test 1.4000 but before that some consolidation cannot be ignored.

    Recent economic releases from Euro zone and the U.S.

    (click to enlarge)

    The latest economic releases from U.S. and Europe gave a neutral picture for comparative strength.

    Euro zone:

    1. German Gfk Consumer Confidence Survey: 5.8, positive as compared to the forecasts as well as the previous 5.7.
    2. Consumer Confidence: -23.8, same as the consensus and better than the previous -26.3.
    3. German Retail Sales (YoY): -4.7%, negative as compared to the forecasts (-1.6%) as well as the previous -0.6%.
    4. German Unemployment: Unemployment change in January was -16K and better than the consensus of 8k and previous -2K. Unemployment rate dropped to 6.8% from 6.9%.
    5. Consumer Price Index (YoY) (prelim.): 1.7%, negative as compared to the forecasts (2.0%) as well as the previous 2.1%. Same with the month on month change of -0.5% against the consensus of -0.4% and previous 0.9%. Year on year harmonized CPI (prelim.) was 1.9% against the consensus and previous 2.0%.
    6. Markit Manufacturing PMI: German PMI 49.8 and positive as compared to the forecasts (48.8) as well as the previous 46.0. Same with Euro zone's PMI which was 47.9 against the consensus of 47,5 and previous 46.0.
    7. Consumer Price Index (YoY) Prelim.: 2.0%, negative as compared to the forecasts as well as the previous 2.2%.
    8. Unemployment Rate: Remain unchanged at 11.7% though the consensus was for a rise to 11.9%.

    Latest data from the U.S.

    1. Durable Goods Orders (December data): 4.6%, positive as compared to the forecasts (1.8%) as well as the previous 0.8%. Durable goods orders ex Transportation changed by 1.3% and though it was better than the consensus but less than the previous 1.6%.
    2. Pending Home Sales: Year on year change was 6.9% against the previous 8.9%. Month on month change was -4.3% and negative as compared to the forecasts (0.3%) as well as the previous 1.6%.
    3. Consumer Confidence: 58.6, negative as compared to the forecasts (64.0) as well as the previous 66.7.
    4. ADP Employment Change: 192K, positive as compared to the forecasts (165K) as well as the previous 185K.
    5. Gross domestic Product Annualized (Q4) - (preliminary): -0.1%, quite negative as compared to the forecasts (1.1%) as well as the previous 3.1%.GDP price index preliminary data for Q4 was 0.6% against the previous 1.6%.
    6. Core Personal Consumption Expenditure (QoQ in Q4) (preliminary): 0.9%, negative as compared to the forecasts (1.0%) as well as the previous 1.1%. Quarter on quarter PCE prices in Q4 (prelim.) was 1.2% against the previous 1.6%.
    7. Interest rate was kept same at 0.25%.
    8. Personal Spending (MoM): 2.6%, positive as compared to the forecasts (0.8%) as well as the previous 1.0%.
    9. Nonfarm payroll: 157K, negative as compared to the forecasts (160K) as well as the previous 196K.
    10. Average Hourly earnings: Year on year change was same as the previous release i.e. 2.1%. The month on month change 0.2% was same as the consensus but less than the previous 0.3%.
    11. Unemployment Rate: Unemployment rose to 7.9% from the previous 7.8%. The consensus was that it would remain unchanged.
    12. Reuters/Michigan Consumer Sentiment Index: 73.8, positive as compared to the forecasts (71.5) as well as the previous 72.9.
    13. Construction Spending (MoM): 0.9%, positive as compared to the forecasts (0.6%) as well as the previous -0.3%.
    14. ISM Manufacturing PMI: 53.1, positive as compared to the forecasts (50.6) as well as the previous 50.7.
    15. ISM Prices Paid: 56.5, positive as compared to the forecasts (56.0) as well as the previous 55.5.

    EUR/USD Outlook:

    We would expect a support in the range of 1.3541 to 1.3586 i.e. the support levels of the last two trading days.

    If the above mentioned support levels hold and a break over the recent 1.3711 takes place then on the upside we expect a move towards 1.3769 to 1.3833 resistance zone. Please note that 1.3769 was the low of the resistance zone during November 1st to November 15th, 2011. While a move to 1.3833 will represent 61.8% retracement of the downward move from 1.4940 to 1.2042. Please check this EUR/USD alert for the details. Any decisive break over 1.3833 should target a test of the strong psychological level of 1.4000.

    On the downside, as mentioned above, we expect support in the range of 1.3541 to 1.3586. Even if that support is broken, a strong support is expected over 1.3500 psychological level. However, any break below 1.3500 will start neutralizing our immediate bullish outlook but a better confirmation of the same will come with a break below 1.3414. In case such a move takes place then we will look forward to some deeper consolidations.

    Please note that the above EUR/USD outlook and forecast is the view of the author and is not presented as an investment advice.

    Author: Himanshu Jain.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: Forex
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