EUR/USD remains under pressure, as the pair struggles to stay above the all-important 1.30 level. The markets are nervous as US lawmakers could not reach an agreement on how to deal with the country’s budget deficit, which resulted in automatic spending cuts on Friday. The week is getting off to a quiet start, with no US economic releases on schedule. In the Eurozone, there was some positive news out of Spain, as Unemployment Change fell sharply and easily beat the estimate. In Brussels, the Eurogroup finance ministers gather for their monthly meeting.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- Asian session: Euro/dollar was quiet, and dipped to a low of 1.2990 before consolidating at 1.2994, as the pair touched a high of 1.3084 and consolidated at 1.3072. In the European session, the pair is back above the 1.30 line.
- Current range: 1.3000 to 1.3030.
Further levels in both directions:Â 
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- Below: 1.3030, 1.3000, 1.2960, 1.2880, 1.2805, 1.2746, 1.27 and 1.2660.
- Above: 1.3100, 1.3130, 1.3170, 1.3255, 1.3290, 1.3350, 1.34 and 1.3486.
- 1.30 is providing weak support. The next support level is 1.2960.
- On the upside, the pair next faces resistance at 1.3030. 1.3100 is stronger.
Euro/dollar under pressure over US budget deadlock – click on the graph to enlarge.
EUR/USD Fundamentals
- 8:00 Spanish Unemployment Change. Exp. 77.5K. Actual 59.4K.
- All Day: Eurogoup Meetings in Brussels.
- Eurozone 9:30 Sentix Investor Confidence. Exp. -4.5 points.
- 13:00 US FOMC Member Janet Yellen Speaks.
- 18:15 US FOMC Member Jerome Powell Speaks.
For more events and lines, see the EUR/USD
EUR/USD Sentiment
- Grillo Proposes referendum on euro: Beppe Grillo, head of Italy’s Five Star Movement, was in the weekend headlines after suggesting that Italy hold a referendum on whether to remain in the Eurozone. Italy’s is staggering under a debt of two trillion euros, and Grillo has called for the country to renegotiate the debt. Grillo, who led his party to a stunning showing in last week’s election, can now play kingmaker in any coalition talks, and his anti-euro rhetoric can no longer be dismissed. The political picture remains a stalemate, and if there is no progress soon, we can expect talk of new elections in June to get louder.
- US faces another fiscal crisis: It wasn’t too long ago that everyone was talking about the “fiscal cliffâ€. This time the budget crisis is called “sequestrationâ€, which saw $85 billion in automatic spending cuts kick in on Friday, as the Democrats and Republicans failed to reach agreement and were quick to point fingers at each other for the impasse. The core issues, spending cuts and tax reforms, continue to divide US lawmakers along party lines. Republicans want to take the axe to social programs such as Medicaide, while Democrats insists on tax hikes as part of any deficit reduction plan. The negotiations are set to continue on Capitol Hill this week.
- Eurozone officials nervous about Italy stalemate: The shock of the results of parliamentary elections in Italy quickly spread beyond Italy, as Eurozone officials scrambled to put a brave face on the surprising results. German Foreign Minister Guido Westerwelle urged Italy to form a stable government as quickly as possible. Westerwelle noted that the entire Eurozone was “in the same boat†with regard to the debt crisis, and cooperation between the Eurozone members was essential. French Finance Minister Pierre Moscovici tried to sound reassuring, stating that the results did not threaten stability in the Eurozone, but at the same time, it was essential that Italy gets its act together and form a new government. However, Spain’s foreign minister, Jose Garcia-Margallo did not hide his pessimism, warning that the election results could have dire consequences for both Italy and Europe. The election has rattled markets worldwide, and the euro could take a tumble if a fractured Italy doesn’t get its act together in a hurry.
- US numbers mostly positive: Largely overshadowed by the dramatic developments in Italy, the US posted some solid releases last week. CB Consumer Confidence and New Home Sales looked very sharp. There was also good news on the manufacturing front, as the ISM Manufacturing PMI beat expectations. The week’s big disappointment was GDP,which posted a negligible gain of 0.1%, raising concerns about the health of the economy. Unemployment Claims dropped nicely, easily beating the forecast. All in all, US releases were positive, and the markets will be hoping that the good news continues into March.
