EUR forecasted to come under pressure today; German constitutional ruling lies ahead
The euro (Currency:EUR) is in consolidate mode against the USD today; however there are some decent gains elsewhere as the below figures indicate.
The euro dollar exchange rate is unchanged on Friday's closing rate, EUR-USD is at 1.3217 at 11:35 in London.
The euro pound exchange rate is 0.17 pct higher at 0.8512.
The euro Australian dollar is 0.6 pct higher at 1.4010.
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The all-important euro dollar exchange rate pair continues to be of importance for general euro moves.
Jason Mahony at Alpari is warning that the technical charts are advocating for a test of slightly lower levels in the euro / dollar rate ahead of any renewed pushes higher:
"Today we opened around the 1.32 area, which represents the previous highs in April and thus the ability to treat this level as support would be notable for a move higher. That being said, there is a potential for the price level to move lower towards the 38.2 Fibonacci retracement (May 2011 – July 2012) prior to a move higher.
"Taking a look at the weekly chart, the target for the pair is for a move higher towards 1.383, which represents the 61.8 Fibonacci retracement. This would also provide an aspect of symmetry given the previous two rally’s in 2012/13 were both also 1000 pips in height."
Italian Industrial Production does the euro no favours
Weighing on the euro today was news out of the Italian economy where Industrial Production posted a 0.3 pct month on month contraction in April, after a slightly downwardly revised -0.9 pct in the previous month.
Loredana Federico at UniCredit Bank says:
"In line with our expectation, today’s data provide a weak entry into the second quarter and pave the way for a further contraction in industrial activity during the spring.
"Notwithstanding the slight downward GDP revision in 1Q13, we confirm our growth story: we see 2Q GDP contracting by 0.4% qoq and a return to mildly positive growth toward the end of the year when the benefit of the injection of liquidity into the economy through the clearance of arrears will start to materialise."
US dollar has further upside potential versus the euro
That the euro has been unable to record any fresh gains against the US dollar should come as no surprise if we consider the big data event at the close of last week.
"Non-Farm-Payroll offered a positive surprise. Nonfarm payrolls came out at 175,000 while 163,000 had been expected. Immediately the equity market and USD increased. US interest rates rose a tad, which leads us to believe that USD offers further potential from the current level," says Leander Dreyer at Jyske Bank.
Indeed, Dreyer says he is a seller of euros today:
"We recommend investors to sell EUR-USD; stop loss at 133.56. During the morning trade, the US rates are still increasing in anticipation that the Fed will begin to reduce the monthly purchases before the end of the year. As long as the rates are being forced up, EURUSD will also continue to fall."
Outlook for the euro dominated by German constitutional court ruling
Dreyer points out that a big unknown for the euro this week comes in the form of a legal ruling in Germany:
"It should be noted that the German constitutional court will give its decision on the ECB's OMT programme. Jyske Bank's macro-economists expect that the decision will favour the ECB.
"But quite a few market comments may be made, among others by the German ECB members, who - as is well known - oppose the relaxed course of the ECB. Therefore we may see a bit additional selling of EUR in the event of any sharp comments."