The euro continues to point downwards. EUR/USD has posted modest losses in Tuesday trading, continuing the trend we saw throughout last week. The pair has lost around two cents in the past week, and has dropped to the mid-1.31 range in the European session. US markets are back in action on Tuesday after a day off for the Labor Day holiday. In economic releases, Spanish Unemployment Change was up sharply and missed the estimate. Today’s key event is US ISM Manufacturing PMI.
September started out positively, with the release of Eurozone PMIs on Monday. Manufacturing PMIs from Italy, Spain and the Eurozone beat their estimates, and all three posted readings above the 50-point level, which indicates expansion. Eurozone Manufacturing PMI had a long run of releases below the 50 level, but has now stayed above the 50 line for two consecutive readings. Further solid data out of the Eurozone is essential for the euro to recover after sustaining sharp losses against the dollar last week.
After a string of excellent releases, Spanish Unemployment Change soared to 0.0K in September, compared to the August reading of -64.9K. However, this reading is not all that surprising, if we take into account the summer tourist season, which resulted in additional hiring and a substantial drop in unemployment. Still, the reading was higher than the estimate of -5.2 thousand. The week started off nicely as Spanish Manufacturing PMI pushed above the 50-point level for the first time in over two years, climbing to 51.1 points. Spanish Services PMI will be released later in the week – will it keep up the pace and also produce a solid release?
The US Federal Reserve has kept very quiet about when it might taper QE, and recent statements from Fed policymakers underscore divisions regarding the timing of such a dramatic move. What is clear is that stronger US numbers will increase the likelihood of the Fed acting sooner rather than later. This means that US releases, especially employment numbers, will be under the market microscope and traders should be prepared for QE tapering, which will likely boost the US dollar against other major currencies.
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EUR/USD September 3 at 11:40 GMT
EUR/USD 1.3166 H: 1.3197 L: 1.3158
- EUR/USD continues to post limited losses, and touched a low of 1.3158 in the European session.
- The pair continues to face resistance at the round number of 1.33. The next line of resistance is at 1.3410.
- On the downside, EUR/USD is testing support at 1.3162. This line has remained firm since mid-July. This is followed by a support level at 1.3100.
- Current range: 1.3162 to 1.3300
- Below: 1.3162, 1.3100, 1.3050 and 1.3000
- Above: 1.3300, 1.3410, 1.3476, 1.3585 and 1.3649
EUR/USD ratio continues to point towards long positions on Tuesday. This is not currently reflected in the pair, as the euro continues to post modest losses against the dollar. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar continuing to post gains at the expense of the euro.
EUR/USD continues to lose ground, and is trading in the mid-1.31 range. Will the downward trend continue? With the US releasing its first key event, ISM Manufacturing PMI, we could see some stronger movement from EUR/USD in the North American session.
EUR/USD Fundamentals
- 7:00 Spanish Unemployment Change. Estimate -5.2K. Actual 0.0K.
- 9:00 Eurozone PPI. Estimate 0.2%. Actual 0.3%.
- 13:00 US Final Manufacturing PMI. Estimate 53.9 points.
- 14:00 US ISM Manufacturing PMI. Estimate 54.2 points.
- 14:00 US Construction Spending. Estimate 0.3%.
- 14:00 US IBD/TIPP Economic Optimism. Estimate 46.2 points.
- 14:00 US ISM Manufacturing Prices. Estimate 51.6 points.