EUR/USD Sep. 20 – Lower After European PMI Data

EUR/USD continues to fall, following the release of PMI data from Germany, France and the Euro-zone. Although the readings were mixed, all except German Flash Services PMI point to continuing contraction. Spain’s 10-year Bond Auction went well, with yields dropping to 5.66%. It’s a busy day in the US as well, highlighted by Unemployment Claims and the Philly Fed Manufacturing Index.

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

EUR/USD Technical

• Asian session: Euro/dollar fell below 1.30 and consolidated at 1.2971. The pair is losing ground in the European session.
• Current range: 1.29 – 1.2960

Further levels in both directions:  

• Below: 1.2960, 1.29, 1.2814, 1.2750, 1.2670, 1.2624, 1.2587, 1.2520 and 1.2460.
• Above: 1.30, 1.3060, 1.3105, 1.32, 1.3290, 1.34, 1.3437, 1.3480 and 1.3540.
• 1.2960 has reverted to resistance as the pair loses ground. 1.30 is stronger.
• 1.29 is an important support level.

Euro/Dollar down after mixed PMI data – click on the graph to enlarge.

EUR/USD Fundamentals

• 6:00 German PPI. Exp. +0.4%. Actual +0.5%.
• 7:00 French Flash Manufacturing PMI. Exp. 46.5 points. Actual 42.6 points.
• 7:00 French Flash Services PMI. Exp. 49.5 points. Actual 46.1 points.
• 7:30 German Flash Manufacturing PMI. Exp. 45.4 points. Actual 47.3 points.
• 7:30 German Flash Services PMI. Exp. 48.5 points. Actual 50.6 points.
• 8:00 Euro-zone Flash Manufacturing PMI. Exp. 45.6 points. Actual 46.0 points.
• 8:00 Euro-zone Flash Services PMI. Exp. 46.0 points. Actual 47.6 points.
• Spanish 10-year Bond Auction. Actual 5.55% yield. This was a sharp improvement from the previous yield of 6.64%.
• 12:30 US Unemployment Claims. Exp. 374K.
• 13:00 US Flash Manufacturing PMI. Exp. 51.6 points.
• 13:30 FOMC Member Dennis Lockhart Speaks.
• 14:00 Euro-zone Consumer Confidence. Exp. -24 points.
• 14:00 US Philly Fed Manufacturing Index. Exp. -4.1 points. See how to trade this event with USD/JPY.
• 14:00 US CB Leading Index. Exp. -0.1%.
• 14:30 US Natural Gas Storage. Exp. 66B.
• 21:00 FOMC Member Sandra Pianalto Speaks.

EUR/USD Sentiment

• Uncertainty continues over Spain bailout: Spanish officials continue to insist that they need more time to consider the conditions of a bailout request from the ECB. Some analysts have suggested that PM Mariano Rajoy would prefer to push the official request until after October 21, due to internal calculations. An ECB official made it clear that the OMT program will be utilized and isn’t only a threat. Spain’s political and economic problems continue to worsen by the day. Bankia is a black hole for money, and the deterioration of the crisis is causing regional friction to flare up, and a pro-independence rally in Barcelona drew huge crowds. There was some good news, as the 10-year Spanish Bond Auction raised 4.8 billion euros, which was higher than the estimate of 4.5B. As well, yields dropped to 5.55%, well down from the previous yield of 6.64%.
• Geopolitical tensions rising: Demonstrations continue in various Arab countries against the US after a film insulting the prophet Muhammad circulated. The violent response comes on the heels of the assassination of the US ambassador to Libya. In China, protests continued against Japanese targets, forcing the closure of Japanese factories and businesses. The background of the diplomatic crisis is the purchase of disputed islands by the Japanese governments. These islands could be used as military bases and impact the sovereignty of the waters around them – waters that could contain valuable natural resources.
• QE3 shock waves still being felt: Last Thursday, Bernanke finally pulled the trigger: the Fed launched an open ended program worth $40 billion dollars of monthly buys of MBS in order to help the housing sector, but also to encourage lending. This comes in addition to extending the low rates guidance to 2015 and continuing the existing Twist program worth $45 billion a month.  This aggressive easing was later justified by Bernanke, who also said that the Fed is looking at the general picture of unemployment (including the participation rate). All the major currencies enjoyed gains against the greenback.
• US Housing Data Impresses: The housing sector has gained steam recently, and Existing Home Sales looked sharp, posting a figure of 4.82 million. This easily beat the estimate of 4.57M. Rising house prices  could encourage US consumers to spend more and kick-start the economy. 
• Greece turmoil continues: Various EU officials have hinted flexibility regarding Greece’s repayment schedule, stressing it doesn’t mean more money. Greece’s three coalition partners are still unable to agree on new austerity, as the economy continues its free-fall. Finance Minister Yannis Stournaras stated that the economy will have contracted by a staggering 25% by the time the recession is over. The government has no easy task in trying to implement cuts of 11.5 billion euros, which is necessary in order to received further bailout payments. Talks about a third bailout program became more loud in recent days, as Greece is nowhere close to meeting targets.

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