EUR/USD Nov 6 – Under Pressure on US Election Day

EUR/USD remains under pressure in cautious trading, as the gruelling presidential campaign is finally over, and Americans go to the polls to choose a new president. The race is extremely tight, but President Obama has a slight edge in the battleground states, and is considered a slim favorite. In today’s Euro-zone releases, Spanish and Italian Services PMIs were better than forecast, but German Factory Orders plunged 3.3%, its sharpest drop since January.

Here’s an update about technical lines, fundamental indicators and sentiment regarding EUR/USD.

See how to trade the US elections with EUR/USD.

EUR/USD Technical

• Asian session: Euro/dollar was steady, trading just below 1.28. The pair has edged downwards  in the European session.
• Current range: 1.2750 to 1.28.

Further levels in both directions:  

• Below: 1.2750, 1.2650, 1.2590 and 1.25.
• Above: 1.28, 1.2880, 1.2960, 1.30, 1.3030, 1.3080, 1.3140, 1.3170, 1.3290 and 1.34.
• The pair continues to test 1.28. 1.2880 is stronger.
• 1.2750 is the next line on the downside.

Euro/dollar under pressure before US election– click on the graph to enlarge.

EUR/USD Fundamentals

• 8:15 Spanish Services PMI. Actual 41.2 points.
• 8:45 Italian Services PMI. Actual 46.0 points.
• 9:00 Euro-zone Final Services PMI. Exp. 46.2 points. Actual 46.0 points.
• 10:00 Euro-zone PPI. Exp. +0.3%. Actual +0.2%.
• 11:00 German Factory Orders. Exp. -0.3%. Actual -3.3%.
• All Day: US Presidential Election.
• All Day: US Congressional Elections.

For more events and lines, see the EUR/USD

EUR/USD Sentiment

• Obama, Romney in dead heat as US votes: President Barack Obama and Republican contender Mitt Romney have been fighting for every vote, as the presidential campaign wraps as as Americans go to the polls in presidential and congressional elections. This contest promises to go down to the wire, with most polls pointing to a virtual tie between the two candidates. However, Obama has a slight lead in the crucial battleground states, and appears to have the edge in electoral votes. The markets may have already factored in a victory by President Obama, but the race promises to end on an exciting, perhaps nail-biting note. Follow Election Night developments on the US Elections Timetable.
• Strong US employment data boosts dollar: US employment numbers were released last Friday, and given the tight presidential race, there was something for everybody. Republicans were quick to focus on the higher unemployment rate, which edged from 7.8% to 7.9%. However, the Democrats (and the markets) zeroed in on the strong non-farm payrolls,which climbed to 171 thousand, well above the estimate of 121K. The dollar took full advantage of the positive report, gaining on the major currencies, including the euro.
• Greek government faces parliamentary tests, massive strike: Once the winner of the US election is determined, the markets are likely to fix their focus on Athens, as the Greek government tries to win approval for its austerity budget. On Monday, the coalition government unveiled its four-year austerity plan. The plan includes drastic spending cuts and tax hikes, and is meant to save 13.5 billion euros in the 2013 budget. The Greek Parliament votes on the austerity package on Wednesday and on the 2013 budget on Sunday. The results could determine whether Greece receives the next tranche of the bailout package, which has been on hold since May. Prime Minister Antonis Samaras has warned that if the austerity measures and budget are rejected by Parliament, Greece will “descend into chaos”. Samaras has promised that these will be the last cuts to wages and pensions, but most Greeks, hard-hit by the economic crisis, are understandably skeptical. The opposition has promised to fight the government’s measures, and a massive 48-hour strike is scheduled for today will bring Greece to grinding halt.
• Constitutional obstacle to Greek bailout deal: The thorny negotiations between the Greek government and the troika are not only dependent on economic and political factors, but constitutional issues as well. Two months ago, a German court ruled that the ESM was constitutional as far as Germany was concerned. Now, a Greek court has said that proposed retirement age hikes and pension cuts, demanded by the troika, could be unconstitutional. This could present another snag to the next tranche of aid for Greece, which desparately needs the funds to stay afloat.
• Will Spain ask for aid?: Spain is in the grips of a recession, and the economy shows no sign of improving in the near future. Employment numbers continue to worsen . Flash GDP declined for the fourth straight quarter, dropping by 0.3% in Q3, and Monday’s Manufacturing PMI pointed to further contraction.Yet, despite the worsening economy, the government appears in no rush to ask for an aid package, although it is “considering” doing so at some point. Ironically, promises of help from the EU have lowered Spain’s borrowing costs from their unsustainable levels, resulting in less pressure on the government to request an aid package. German Finance Minister Wolfgang Schaeuble, who has taken a tough stance on Greece, had warm words for Spain, saying it was on the “right path” and was taking steps to improve its economic imbalances.

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