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15 Mar 2013
Euro buyers insist to defend $1.30; volatility to be on the rise
EUR/USD has managed to recover away from year lows at 1.2910, and is currently just below yesterday's highs at 1.3033 following the USD sell-off that came in after upbeat US unemployment data and PPI just in line with expectations at +0.7%, higher for fourth consecutive month, which adds to speculation of an early exit to QE.
All in all, EUR/USD is still lower by -1.31% since 2013 started, and presumably, the bottom has not been seen yet, many analysts point out.
The pair proved yesterday it is getting near some decent demand area as it approaches key technical levels such as the 200 day SMA around 1.2870 last, also 50% retrace of the large daily leg up from past July lows 1.2035/1.3711 at 1.2873, and key support from Nov to Dec last year. Worth noting out of the 59 contributors in Reuters forecast poll, the 2 more bearish 1-month in advanced from March 06, and the 2 most accurate according to Reuters, RBS London and Idea Global, point to 1.2750 and 1.2800 respectively, being the median among the 59 at 1.3040.
The day ahead is a busy one in all aspects, including the second Euro-group meeting day, where a deal on a Cyprus bailout is expected to be reached. Also, the new Italian parliament will be convening for the first time after the inconclusive February election. In the data front, will be time for CPI figures in the, first in Europe at 10:00 GMT, followed by the key US one at 12:30 GMT, expected to come at +0.2% MoM, coupled with Empire State Survey at the same time. Volatility guaranteed.
Later on, a batch of US data is scheduled, including US TIC Long-Term purchases at 13:00 GMT, US Capacity utilization rate and Industrial production 15 minutes later, FED's Fisher speaking at 13:30 GMT, and Preliminary University of Michigan consumer sentiment at 13:55 GMT.
As dessert, EU Von Rompuy will speak at 16:15GMT at the German Marshall Fund conference in Brussels. All happening amid a ton of derivative contracts expirations through the weekend, including monthly currency options.
For the longer term, ">Societe Generale Sebastien Galy notes the FX markets are now under the influence of a three themes: "the American economic revival, diverging monetary policy expectations and the (unfinished) Euro area (EA) crisis," he says, adding that "those themes all point in the same direction: a stronger dollar."
"Dollar strength is now far less dependent on risk conditions" Sebastien notes, "as the US economic outperformance and the fears of a not-too-distant Fed exit imply that the dollar is no longer a funding currency of choice in the carry trade" he adds. The exit debate will heat up in H2, Sebastien said.
From a technical perspective, “The EUR/USD hourly chart shows a positive stance when it comes to technical readings, with not much strength at the time being,” notes Valeria Bednarik, Chief Analyst at Fxstreet.com, “with price pressuring the 1.3000 area,” she adds.
“4 hours chart shows price still below a bearish 20 SMA while indicators head back south, retracing from their midlines. Mentioned trend line comes today around 1.3050, and should attract sellers if reached,” Valeria suggests.
Lots still to happen in the shortest term, with majors at key levels, and big macro risk events around the corner, such as German ZEW next Tuesday, or US FOMC the following day, US housing data, and a bunch of key Euro-zone sovereign debt auctions. Volatility is likely to be on the upside after last few days of slowdown. Besides, starting March 17, the Mercury retrograde period will be over, a phase seen for many speculators as a period with choppy and indecisive breakouts.
All in all, EUR/USD is still lower by -1.31% since 2013 started, and presumably, the bottom has not been seen yet, many analysts point out.
The pair proved yesterday it is getting near some decent demand area as it approaches key technical levels such as the 200 day SMA around 1.2870 last, also 50% retrace of the large daily leg up from past July lows 1.2035/1.3711 at 1.2873, and key support from Nov to Dec last year. Worth noting out of the 59 contributors in Reuters forecast poll, the 2 more bearish 1-month in advanced from March 06, and the 2 most accurate according to Reuters, RBS London and Idea Global, point to 1.2750 and 1.2800 respectively, being the median among the 59 at 1.3040.
The day ahead is a busy one in all aspects, including the second Euro-group meeting day, where a deal on a Cyprus bailout is expected to be reached. Also, the new Italian parliament will be convening for the first time after the inconclusive February election. In the data front, will be time for CPI figures in the, first in Europe at 10:00 GMT, followed by the key US one at 12:30 GMT, expected to come at +0.2% MoM, coupled with Empire State Survey at the same time. Volatility guaranteed.
Later on, a batch of US data is scheduled, including US TIC Long-Term purchases at 13:00 GMT, US Capacity utilization rate and Industrial production 15 minutes later, FED's Fisher speaking at 13:30 GMT, and Preliminary University of Michigan consumer sentiment at 13:55 GMT.
As dessert, EU Von Rompuy will speak at 16:15GMT at the German Marshall Fund conference in Brussels. All happening amid a ton of derivative contracts expirations through the weekend, including monthly currency options.
For the longer term, ">Societe Generale Sebastien Galy notes the FX markets are now under the influence of a three themes: "the American economic revival, diverging monetary policy expectations and the (unfinished) Euro area (EA) crisis," he says, adding that "those themes all point in the same direction: a stronger dollar."
"Dollar strength is now far less dependent on risk conditions" Sebastien notes, "as the US economic outperformance and the fears of a not-too-distant Fed exit imply that the dollar is no longer a funding currency of choice in the carry trade" he adds. The exit debate will heat up in H2, Sebastien said.
From a technical perspective, “The EUR/USD hourly chart shows a positive stance when it comes to technical readings, with not much strength at the time being,” notes Valeria Bednarik, Chief Analyst at Fxstreet.com, “with price pressuring the 1.3000 area,” she adds.
“4 hours chart shows price still below a bearish 20 SMA while indicators head back south, retracing from their midlines. Mentioned trend line comes today around 1.3050, and should attract sellers if reached,” Valeria suggests.
Lots still to happen in the shortest term, with majors at key levels, and big macro risk events around the corner, such as German ZEW next Tuesday, or US FOMC the following day, US housing data, and a bunch of key Euro-zone sovereign debt auctions. Volatility is likely to be on the upside after last few days of slowdown. Besides, starting March 17, the Mercury retrograde period will be over, a phase seen for many speculators as a period with choppy and indecisive breakouts.