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Spain Unemployment Hits Record High – Euro Movement Remains Indecisive

January 24, 2013 in Forex Fundamentals and News

SpainThe unemployment data released today by National Statistics Institute in Madrid showed that Spain’s unemployment jumped up to 26.02% in the 4th quarter of 2012. This is a record high at least since 1976. This casts dark shadows on the outlook of the country which had seen a very controlled unemployment during 2001 to 2008 when the average unemployment rate was close to 10%. Prior to this the jobless rate had gone very high during July 94 when it had hit the level of 24.22% but was controlled before reaching 25% level.


Spanish unemployment level – historical view

Historical unemployment rate of Spain

Spain has been implementing aggressive austerity measures to balance the budget. The fifth round of spending cuts of 2012 had started in the 4th quarter of 2012. The measures include increase in the sales tax, cuts in unemployment benefits, public sector jobs and wages. The effect of the same was expected to result in the further recession and rise in the unemployment.

According to Eurostat total number of unemployed people in Euro area were 18.82 million in November 2012. With the number of unemployed people rising to 6 million, Spain has become the home of one third unemployed workforce of the Eurozone.

EUR/USD remain indecisiveEUR/USD remains directionless

Euro’s movement against the U.S. dollar remains indecisive as it has been since the markets opened this week. After the markets opened on Monday, EUR/USD moved in tight ranges between 1.3300 to 1.3332 for over 30 hours of trading. A break of that range resulted in quite volatile moves which have been failing to show any clarity of direction. Since then the currency pair had gone to a high of 1.3371 before a fall to 1.3266. The subsequent rise saw it touching 1.3354 before another fall to 1.3264. The indecisiveness did not end there as the pair again rose to 1.3347 before falling again to 1.3286 and then jumping again to 1.3342. The only consistence is that the highs are getting lower and that is indicating an underlying bearish mood in the overall indecisiveness.

Commodity Currencies Losing Direction Amidst Uncertain Economic Outlook And Psychological Pressure

January 23, 2013 in Forex Fundamentals and News

AUDJPY - direction less movesCommodity currencies has been seeing a directionless volatile moves against the U.S. dollar. AUD/USD has tried twice to touch the psychological 1.0600 level since yesterday but failed miserably. First time it had gone as high as 1.0578 and then after a drop to 1.0549 it again recovered but failed strongly at 1.0574 and fell sharply to 1.0527 before entering a sideways mode. USD/CAD has made 3 attempts since Friday to test 0.9950 level but failed each time. The first attempt took it to 0.9932 followed by 0.9946 and the last one failed at 0.9945. After recovering from 0.9815, the pair is moving into a narrow range between 0.9900 and 0.9950.

Mixed economic data

Today’s consumer price index data for quarter 4 of 2012 from Australia came out weaker than the market expectations. The quarter on quarter change in the CPI in Q4 was 0.2% against the consensus of economist for a change of 0.4% and the previous change of 1.4%. The year on year change of 2.2% was better than that of quarter 3’s 2% but was less than the expected 2.4%.

Today’s China Conference Board’s leading index data which aggregates six economic indicators to measure economic activity in China indicated a slowdown from previous 1.1 to 0.4 in December. China being the largest export market for Australia affects the sentiments for Australian dollar strongly.

On the other hand yesterday’s data showed an unexpected drop in the existing home sales in the U.S. also. The month on month change in the existing home sales in December 2012 dropped to -0.1% from the previous  4.8% while the market consensus was for a drop to 1.2%.

Global economic outlook concerns

U.S. debt crisis

US debt to GDP ratio

Though Republicans have shown some flexibility for their demand to have the budget spending cuts to increase government’s borrowing levels but this only gives a temporary relief.  On Wednesday in the U.S. the house vote is scheduled for Republican party sponsored legislation to allow Obama administration to extend the borrowing limits to cover the cost obligations for next 3 months. The estimates are that the U.S. Treasury will not have sufficient funds to pay all its bills sometime between Feb. 15 and March 1 week. Delays in firm steps to tackle the issue with longer-term goals is a threat not only to the U.S. economy but the global economy.

Mixed sentiments in Euro zone

Even though the progress in decisive steps in policy decision and Greece bailout have brought in some optimism but one the other hand the crisis is far from over. The high unemployment levels in Europe and ECB’s expectation that the euro-zone economy will shrink 0.3% in 2013 do not create any overall optimistic picture about the economy. The efficient channeling of rescue funds in the time to come and mutual agreements about the same remains a challenge.” Making the ECB a single European bank supervisor this year is a major organizational challenge”,  European Central Bank President Mario Draghi said late yesterday in Frankfurt.

Commodity currencies

Any uncertainties about global outlook keep the uncertainties on for the global currencies. Some positive recent outlook about China’s economic growth in 2013 have been favoring the strength of Australian dollar but on the other hand the overall global economic uncertainties are keeping the Aussie in check. Same is the case with Canadian dollar which has weaken against the US. dollar recently but is now hesitating ahead of the psychological level of 1.000 or parity.

Euro zone Debt Crisis and EUR/USD Outlook – What’s New?

October 23, 2012 in Forex Analysis

EUR/USD had a strong fall, which as of now we will avoid to term as “free fall”. The pair had gone to 1.3139 but could not retest the previous high of 1.3172. This brings the first indication that further consolidation may take.

Before analyzing the current price action technically, let’s try to see what  what other factors are there which can affect the market sentiments as far as EUR/USD is concerned.

EUR/USD Daily Chart:

EUR/USD Daily Chart October 24, 2012

Euro zone Debt Crisis

Debt crisis and Euro zone’s efforts for rescue, as a whole, has been the pivot around which the whole market sentiments have been rotating. A small tick of news here and a strong jump of optimism there, another tick and whole optimism hides behind the walls of sheer pessimism. The old story of the market movements that ultimately what wins is the sentiments over any technical or fundamental analysis (at least in the short-term).

Debt Crisis – What is New?

The latest development in the series has been opposition raised for the very legalities of ESM or European Stability Mechanism. The complaint was raised to the highest court of European Union by Irish Parliament’s Independent member Thomas Pringle.

Pingle’s argument involve Article 125 of the treaty.

The court decision on this should be reached by the end of 2012.

The ruling in this matter may very well go in the favor of the ESM and bailout efforts as the earlier decision of  Federal Constitutional Court of Germany came in September but still it adds one more hurdle in the actual execution of the rescue plans. And it brings in another force which bring pessimism in the high tidal ocean of market sentiments.

Other Economic Events

Euro – Yesterday:

The preliminary report of consumer confidence from Euro zone was slightly better though not much changed from the previous release. The consumer confidence reading came out as -25.6 against the previous -25.9

Euro and U.S. Dollar Today:

Euro zone:

Today’s main economic releases Purchasing Manager Index (PMI) from Euro zone and Germany and IFO business climate, assessment and expectation reports from Germany. All these economic releases are between GMT 7:28 to 8:00.


Today’s main economic releases are Markit manufacturing PMI (prelim) at GMT 12:58 and new home sales at GMT 14:00. Another more important event is interest rate decision at GMT 18:15 but no change is expected in the interest rates. Fed’s Monetary Policy Statement and press conference may need some attention at GMT 18:15.

EUR/USD Price Action and Technical Outlook:

1) As mentioned above that the failure of retesting the previous 1.3172 and fall from 1.3149 indicate the possibilities of further downward consolidation.

2) If we check the weekly chart of EUR/USD, it shows a sideways move for past 6 weeks, after the pair had broken the resistance of the mid-term price action channel very strongly. We also see that the price has been getting support just below 5-week EMA (the green EMA line in the following chart). The price action is well above 200-day Moving Average.

EUR/USD Weekly Chart

EUR/USD Weekly Chart October 24, 2012

EUR/USD- What To Expect?

A break below 1.2950 should bring further consolidation towards 1.2920 first and then possibly towards the 55-day EMA support near 1.2880/1.2890. This level is just above the low of previous weeks candle. Any decisive break below these supports may bring further deeper moves towards the 38.2% retracement of the recent overall upward move.

EUR/USD Retracement?

EUR/USD daily chart 382 retracement

While saying all this, as we all know that the market is very sensitive right now and any small tick here and there may act as a big force and bring some unexpected moves. The weekly MACD still stays above the signal line and with a wide gap. There has been a loss of momentum but still some further upward gains can be expected after any possible consolidation:



EUR/USD Today – 2012/10/05

October 5, 2012 in Forex Analysis

EUR/USD moved up very strongly yesterday. The upward sentiments were visible earlier during the day but those were fueled during ECB President Mario Draghi’s Press Conference and the currency pair went as high as 1.3031 after breaking over the psychological 1.3000 level.

Since then EUR/USD has gone into a sideways mode below 1.3031 and over 1.3007. The previous psychological resistance of 1.3000 has started acting as support.

EUR/USD Hourly Chart:


EURUSD Hourly Chart October 5 2012 0330 GMT

What Caused The Upward Jump:

More or less Draghi’s comments were on the same lines as during the earlier press conference when it was announced that ECB is ready to go for unlimited Bond purchase to help the debt crisis. Yesterday Mario Draghi mentioned that European Central Bank is ready to go ahead with the bond buying plan if the nations in question meet the conditions fro the rescue plan by necessary plans of economic reforms.

Actually speaking there was nothing new in the comments as all other factors remain the same i.e. Spain is still hesitating to ask for the help with the conditions attached. The high unemployment issues remain same, the manufacturing sector has been seeing a downtrend and  all such factors which point towards bearish view about Euro zone and hence Euro as such. But such jumps indicating the underlying hopes that Euro is simply to big to fall as any failure on that account will have global impacts which may cause bigger shocks than the Lehman shock.

EUR USD – What to Expect


Today is the day of Non-farm payroll report from U.S. The report is scheduled to be released at GMT 12:30. The Unemployment report will also be released at the same time. As it happens that most of the time traders go little slow before the non-farm payroll report and market volatility generally remains lower. Considering the very strong jump of yesterday, today we expect the volatility of be lower before the nonfarm payroll release. The volatility may go little higher just below the report and higher after the release.

The previous non-farm release figure was 96K and the consensus are bullish for the rise towards 113K. Any lower figure may bring further upward jump. The break of 1.3000 had taken place after a wait of 10 trading days and hence on the upside that momentum of bullish sentiments may take EUR/USD towards 1.3080/1.3085 resistance zone.

While saying the above, we do not ignore the possibilities of some consolidation towards 1.2880 before the releases. A weaker non-farm and unemployment reports may take EUR/USD toward the support of 1.2920/1.2930.

EUR/USD Today – 2012/9/28

September 27, 2012 in Forex Analysis

EUR/USD Today:

Today’s outlook for EUR/USD: Yesterday was another mixed day for EUR/USD. The pair had gone down to 1.2828 i.e. 2 pips below the first profit target mentioned in our daily technical analysis but then had jumped strongly by 100 pips to 1.2928.

EUR/USD Daily Chart:

EUR/USD Today - Daily Euro - US Dollar Chart


Market Highlights:

1) Greece: Greek Prime Minister could get a nod of agreement from the political coalition partner parties for budget cuts to meet the conditions for receiving the international aid. This was just the first step in the negotiations as it came with the conditions of having the sound growth plans, additional time line of 2 years for the reforms and alternatives for the budget if the economic recovery is faster than expected. While it was the first sign of optimism but it is still only the first sign. We also need to keep the facts at the back of mind that on one side budget cuts would have direct positive impact on the economic reforms but the negative side effects of the cuts in budgets and austerity measures will always be there simultaneously. Money flow is ultimately the measure of the health of an economy. Extremely high unemployment rate of over 25% in Greece also does not offer a positive picture.

2) Spain: A positive step to balance the needs for economic reforms by further austerity measures by cutting the spending under several heads while simultaneously trying to keep the public unrest in control by increase of 1% in pension payments.

3) Euro zone economic releases: German Unemployment Report: The unemployment report from Germany went into the favor of Euro. The report (9K) was better than the consensus of 10K and previously released data of 11K. On the other hand the reports from Euro zone related to business conditions were weak.

4) US economic releases: The reports about durable goods orders came quite weak but the reports about jobless claims were slightly positive.

What to expect from EUR/USD today:

Overall outlook stays bearish but the sentiments driven near-term outlook stays mixed because the sentiments themselves are mixed.
The current resistance is coming near 5day EMA and the price seems to be hesitating there (please check the daily chart of EUR/USD above in which the green line is 5-day EMA, yellow is 22-day and red is 55-day EMA). This itself does not reflect any positive sentiments but in case there is a decisive break of this resistance then some more upward consolidation towards 1.2970/1.2980 cannot be ignored. Around that level the psychological resistance of 1.3000 would come in picture and a break of that is must to expect any substantial near-term gains for EUR/USD.

On the other hand if the resistances hold then further downward move for a retest of first 1.2828 is expected. Any strong break below 1.2820 may take EUR/USD further down towards 1.2740/1.2730 i.e. towards the 55-day EMA support zone. This movement will also represent 38.2% retracement of the recent upward move.


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