EUR/USD April 18 – Steadies After Sharp Losses

EUR/USD continues to display volatility as the pair plunged about 150 points on Wednesday (April 17th). The markets reacted negatively after a senior ECB official stated that a rate cut was a possibility. Thursday is another quiet day, with just one release out of the Eurozone, the Spanish 10-year bond auction. In the US, the markets will be looking for some badly needed positive news, as Unemployment Claims and the Philly Fed Manufacturing Index are released later today. 

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

EUR/USD Technical

• Asian session: Euro/dollar edged higher, touching a high of 1.3161 and consolidating at 1.3151. The pair has is unchanged in the European session.
• Current range: 1.3140 to 1.3170.

Further levels in both directions: 

<img alt=”EUR USD Daily Forecast April 17″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-17-350×196.png” width=”350″ height=”196″ /> 

<img alt=”EUR USD Daily Forecast April 16″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-16-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast April 15″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-15-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast April 11″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-112-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast April 11″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-111-350×196.png” width=”350″ height=”196″ />
<img alt=”EUR USD Daily Forecast April 10″ src=”https://forexcrunch-wpengine.netdna-ssl.com/wp-content/uploads/2013/04/EUR-USD-Daily-Forecast-April-10-350×196.png” width=”350″ height=”196″ />

• Below: 1.3140, 1.31, 1.3050, 1.30, 1.2960, 1.2880, 1.2805, 1.2750 and 1.27.
• Above: 1.3170, 1.3255, 1.3290, 1.3350 and 1.34.
• On the upside, 1.3170, a key level, is providing weak resistance. 1.3255 is stronger.
• 1.3140 is providing weak support. The next support level is at 1.3100.

Euro steady following sharp losses – click on the graph to enlarge.

EUR/USD Fundamentals

• Tentative: Spanish 10-year Bond Auction
• 12:30 US Unemployment Claims. Exp. 349K
• 14:00 US Philly Fed Manufacturing Index. Exp. 2.7 points
• 14:00 US CB Leading Index. Exp. 0.1%
• 14:30 US Natural Gas Storage. Exp. 35B
• Day 1: G20 Meetings
• 16:00 US FOMC Member Sarah Bloom Raskin Speaks

For more events and lines, see the EUR/USD

EUR/USD Sentiment

• Euro sinks on rate cut possibility: The euro pushed higher on Tuesday, but it didn’t take much to bring it back down the next day. The markets reacted negatively to comments by ECB Governing Council member Jens Weidmann that the ECB could lower rates if economic and inflation data warranted such a move. The markets were also unnerved following the release of an IMF report that found that the Eurozone is the weakest part of the global economy, and called on the ECB to lower interest rates in order to boost economic growth. The IMF reduced its forecast of Eurozone growth in 2013 from 0.2% to -0.2%, and also downgraded its forecast of German growth from 0.9% to 0.6%.
• Key US numbers point downward: US economic releases continue to disappoint the markets, as Tuesday’s major events fell below expectations. Building Permits dropped from 0.95 million to 0.90 million, missing the estimate of 0.94 million. Core CPI posted a weak gain of 0.1%, below the estimate of 0.2%. There was some good news from Housing Starts, which hit a multi-year high, improving to 1.04 million. This easily beat the forecast of 0.93 million. The alarm bells may not have gone off just yet, but the continuing weak numbers are raising concerns about the extent of the US recovery. The markets will be hoping for a turnaround as the US releases additional key numbers on Thursday.
• Cyprus will get bailout, but problems remain:  The Cyprus bailout may not be grabbing the headlines, but the crisis is by no means behind us. Back in March, the EU and IMF agreed to provide EUR 10 billion, with Cyprus kicking in another EUR 7 billion. However, the original deal collapsed after Cyprus balked at taxing every bank deposit in the country, following a huge outcry on the island. The EU has agreed to the bailout, but Cyprus must kick in EUR 13 billion. The country plans to raise these funds through a combination of taxes on uninsured depositors, tax rises and spending cuts. President Nicos Anastasiades said he will ask the EU for more help, but it not clear if Cyprus is asking additional bailout funds or funds in another form. The bailout agreement calls for huge taxes on deposits over EUR 100,000. Deposits in the Bank of Cyprus will lose between 37.5% and 60%, while depositors in Laiki Bank, which will be winded down could lose up to 80%. Under the bailout agreement, Cyprus must restructure its banking sector and impose austerity measures. Analysts estimate that the country’s GDP will be slashed by 13% in 2013 and 2014, which will pose serious challenges for the government.
• Italy struggles with political impasse: Remember the Italian election back in February that failed to produce a clear winner? Well, unfortunately not much has happened since, as Italy has been in a political crisis since then. Mario Monti remains head of a caretaker government, but has been unable to continue with badly-needed economic reforms due to the political impasse. Monti and center-left leader Pier Luigi Bersani are hoping to reach agreement choosing a successor to President Giorgio Napolitano, who will step down in May. The crisis in the Eurozone’s third largest economy could undermine the Eurozone, and the markets are hoping that the choosing of a new president will be the first step in establishing a new government.

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