EUR/USD June 7 – Sharp Gains as ECB Stands Pat on Rates

EUR/USD shot higher on Thursday, gaining about 150 points on Thursday. The ECB opted to maintain the current benchmark interest rate at 0.50% and deposit rates at 0%. However, the pair got a boost from optimistic comments from ECB head Mario Draghi about Eurozone growth in 2014. In economic news, German Factory Orders looked weak, hitting a seven-month low. In the US, Unemployment Claims bounced back and were very close to the estimate. On Friday, German Trade Balance easily beat the estimate. German Industrial Production will be released later. The markets will get another look at US employment data, with the release of two key events – Unemployment Rate and Non-Farm Payrolls. 

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar settled down after sharp gains earlier. The pair touched a high of 1.3269 and consolidated at 1.3254. In the European session, the pair is unchanged.

Current range: 1.3255 – 1.3290.

Further levels in both directions: 

<img alt=”EUR USD Daily Forecast June 6″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-6-350×196.png” width=”350″ height=”196″ /> 

<img alt=”EUR USD Daily Forecast June 4″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/06/EUR-USD-Daily-Forecast-June-4-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May31″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May31-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May30″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May30-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May29″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May29-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May28″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May28-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast May27″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/05/EUR-USD-Daily-Forecast-May271-350×196.png” width=”350″ height=”196″ />

• Below: 1.3255, 1.32, 1.3160, 1.31, 1.3050, 1.30, 1.2940, 1.2890, 1.2840, 1.28, 1.2750, 1.27, 1.2624 and 1.2587.
• Above: 1.3290, 1.3350, and 1.34.
• On the downside, 1.3255 is under pressure. 1.32 is the next support level.
• 1.3290 is providing weak resistance. 1.3350 is stronger.

Euro jumps as ECB maintains interest rates – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:00 German Trade Balance. Exp. 16.5B. Actual 17.7B.
• 6:45 French Government Budget Balance. Actual -66B.
• 6:45 French Trade Balance. Exp. -4.4B. Actual -4.5B.
• 10:00 German Industrial Production. Exp. 0.0%
• 12:30 US Non-Farm Employment Change. Exp. 167K. See how to trade the Non-Farm Payrolls with EUR/USD.
• 12:30 US Unemployment Rate. Exp. 7.5%.
• 12:30 US Average Hourly Earnings. Exp. 0.2%.
• 19:00 US Consumer Credit. Exp. 13.4B.

For more events and lines, see the EUR/USD

EUR/USD Sentiment

• Euro flies after ECB Announcement: We’ve become accustomed to volatility from the euro after ECB policy meetings, and Thursday was no exception. The euro put in a good day’s work on Thursday, jumping around 150 points, and the currency even moved above the 1.33 level before retracting. The ECB held a steady course, maintaining the benchmark rate at 0.50% and deposit rates at 0%. ECB President Mario Draghi downgraded the forecast for Eurozone growth in 2013 from 0.6% to 0.5%. However, for 2014, Draghi hiked  the forecast from 1.0% to 1.1%. The markets seemed to focus on the positive aspect of Draghi’s comments, and the euro surged against the US dollar, which was broadly weaker against the major currencies.
• Is Germany headed up, down, or both? Lost in all of Thursday’s excitement was a very weak German manufacturing release. German Factory Orders slumped, falling from 2.2% to -2.6%, its worst showing since November 2012. On Friday, German Trade Balance remained steady at EUR 17.7 billion, well above the estimate of EUR 16.5 billion. The week wraps up with another important manufacturing release,  German Industrial Production. We have been seeing mixed releases from the Eurozone’s largest economy, and the euro will have a tough time staying in flight if Germany continues to alternate between positive and weak releases.
• Spain starts June in style: It isn’t often that Spain posts three strong readings in the same week, but that’s exactly what we’ve seen from the Eurozone’s fourth largest economy. On Wednesday, Services PMI jumped from 44.4 to 47.3 points, its best performance since July 2011, which was the last time that the index was above the 50-point level. Earlier this week, Manufacturing PMI jumped from 44.7 points to 48.1 points, the index’s highest reading since June 2011. This was followed by Unemployment Change, which pointed to 98 thousand less claims, a record for the month of May. Prime Minister Mariano Rajoy, whose government remains deeply unpopular due to a strict austerity program, has asked Spaniards to show more patience. Rajoy could get some much-needed breathing room from these improving numbers. The Spanish PM has said that the worst of the crisis is over, and he would like to cut taxes if the economy improves.
• Strong Spanish employment data: Spain posted some exceptional employment numbers earlier this week, as Unemployment Change dropped by 98.3 thousand, the best performance ever for the month of May. The estimate stood at -50.2 thousand. However, it should be noted May is often a good month for employment numbers, and the Unemployment Rate hit a record high of 27.1% in Q1, so the employment picture remains grim, despite the solid Unemployment Change release.
• US employment numbers mixed: On Wednesday, ADP Non-Farm Payrolls slipped badly, in what has become a disturbing trend. The key employment indicator missed the estimate for the third straight month. The indicator posted a reading of 135 thousand, well off the forecast of 171 thousand. Unemployment Claims looked better, coming in at 346 thousand. This was very close to the forecast of 345 thousand. The markets will get another look at the US employment picture on Friday, with the release of Unemployment Rate and Non-Farm Payrolls. If the results are not in line with market expectations, we could see more volatility from EUR/USD.

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