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EUR/USD: Knockin' On 1.3000's Door, Again

By Saxo BankForexApr 18, 2013 09:42AM ET'-on-1.3000's-door,-again-163544
EUR/USD: Knockin' On 1.3000's Door, Again
By Saxo Bank   |  Apr 18, 2013 09:42AM ET
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EUR/USD reversed hard yesterday as fresh longs were knocked out of their positions. Now we’re back near that pesky 1.3000 magnet. Meanwhile, I’m still pondering the risk of considerable JPY mischief.

EUR/USD got smacked yesterday by purported Germany ratings downgrades, but also from the weakness in risk appetite and the comment from the ECB’s (Bundesbank’s) Weidmann, who mentioned that a rate cut from the ECB was possible, even if he didn’t think it would do much good. The sell-off came at a technically sensitive area, as it was clear that traders had put on significant new long positions on Tuesday, and the fresh longs were quickly stopped out in a selling frenzy that took the pair all the way near the 1.3000 magnet (I wrote recently that EUR/USD has traversed this figure on something like 140 trading days since reaching it for the first time back in 2004).

In Italy, the presidential elections are getting considerable attention, but Italian yields have drooped back within 25 bps of their lowest levels of the year below 4.25%, so there’s not enough uncertainty to excite any “flight from the periphery” trade. From here, I would look at the day pivot in the 1.3075-80 area and then the 1.3100 level as important resistance levels. 1.3000 is the troublesome area to the downside that must be taken out before we see more momentum for a 1.2750 test.

Yesterday’s Riksbank saw the SEK coming completely unglued, but I suspect some of the weakness was also from the general risk-off feeling across the market and I would expect this to continue for the krona. This 6.55 area in USD/SEK is rather pivotal looking and wondering if we get an acceleration if we are able to work back through there, which would more or less coincide with a breakdown through the 1.3000 area in EUR/USD.

Note the importance of the 6.55 zone and the 200-day moving average creeping lower as well. A pull higher through this level could set up an eventual 6.80 test.
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USD/SEK" width="777" height="563" />
Elsewhere, GBP had an interesting day yesterday, with the sharp EUR/GBP rally to new local highs sharply reversed after the negative EUR news flow. At the same time, GBP/USD posted a bearish reversal on the day and has worked back through the 1.5250/70 area at its lows. I will be looking for a follow up move lower in GBP/USD to confirm this if we are more or less able to remain below 1.5300 that could put us on the road for a 1.5000 test (encouraged by today’s weak UK Retail Sales data), while at the same time suspecting that EUR/GBP has put in a high for now and that most of the range for that pair will lie to the downside in coming days.

Looking Ahead
Markets should be very nervous after the gold market came completely unhinged late last week and earlier this week and after the ugly sell-off in equities twice this week. I have to wonder if the JPY crosses could be the next source of mischief around the G20 meeting that concludes today, and the IMF meeting over the weekend. The draft statement is fairly clear in warning against using currency weakness to gain an advantage (and this was after expectations were adjusted lower on this meeting producing anything significant on currencies).

So far, things have remained relatively calm, but it’s a confidence game out there and volatility could quickly accelerate given the large speculative positions on the line. Remember how last Friday played out…

The U.S. weekly claims data will receive plenty of focus today after wild swings in the data recently and the U.S. Philly Fed is the second of the major regional manufacturing surveys for April.

Economic Data Highlights
  • Japan Mar. Adjusted Merchandise Trade Balance out at -¥922B vs. -¥934.5B expected and -¥1092.5B in Feb.
  • New Zealand Apr. ANZ Consumer Confidence out at 119.2 vs. 114.8 in Mar.
  • Australia Q1 Business Confidence out at 2 vs. -5 in Q4
  • Japan Mar. Nationwide Department Store Sales out at +3.9% YoY vs. +0.3% in Feb.
  • UK Mar. Retail Sales ex Auto Fuel out at -0.8% MoM vs. -0.6% MoM expected
Upcoming Economic Calendar Highlights (all times GMT)
  • Switzerland SNB’s Zurbruegg to Speak (0900)
  • Sweden Riksbank’s Jansson to Speak (0915)
  • US Weekly Initial Jobless Claims (1230)
  • US Fed’s Kocherlakota to Speak (1300)
  • US Fed’s Lacker to Speak (1330)
  • US Weekly Bloomberg Consumer Comfort Survey (1345)
  • US Apr. Philadelphia Fed Survey (1400)
  • US Mar. Leading Indicators (1400)
  • Canada BoC’s Carney Interview (1500)
EUR/USD: Knockin' On 1.3000's Door, Again

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EUR/USD: Knockin' On 1.3000's Door, Again

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