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EUR/USD Drops Amidst Changing Sentiments

January 16, 2013 in Forex Fundamentals and News

EUR/USD dropsAfter going as high as 1.3404, EUR/USD could not sustain the psychological resistance of 1.3500 ranges. The currency pair remained in sideways mode below 1.3400 for over 15 hours but then fell strongly to 1.3263 before recovering slightly.

U.S. Debt crisis and President Barak Obama’s Firm stand

President Barak Obama’s firm stand about raising the borrowing limits to come out of the debt crisis has given some push to the strength of the U.S. dollar. Obama has firmly refused to accept the demands of the republicans to negotiate on federal spending cuts to raise the borrowing limits. “America cannot afford another debate with this Congress about whether or not they should pay the bills they’ve already racked up,” was his message during a press conference in Washington yesterday.

Though the republicans are not backing away from their demands of linking the raise in the borrowing limits to the spending cuts and that keeps the pressure on  the dollar but on the other hand Obama’s refusal for any negotiations in this regards has been taking out some immediate pressure from the currency.

Latest economic releases

The latest economic releases from U.S. and Europe gave a neutral picture for comparative strength though it can be seen as mildly favoring the single currency i.e. euro in the short-term.

Euro zone economic data

1) Consumer Price Index: The previous year on year change in the German CPI was 1.9%. The latest data of December which was released at GMT 07:00 on January 15th showed a rise to 2.1% which was as per the consensus of the economists.

The previous change in the year on year harmonized CPI was also 1.9%. The latest released data for December showed a change of 2.0% and though it was slightly less than the consensus of 2.1% but was better than the previous release.

2) German real GDP growth: There was a drop from previous 3.0% to 0.7% which was also less than the consensus of 0.8%.

3) European Monetary Union’s Trade Balance: The trade balance reports showed an improvement.  The previous release of trade balance s.a. for November was Euro 7.4 billion while yesterday’s data for December showed an increase to 11.0 billion euro. Similarly the latest data for trade balance n.s.a. came as 13.7 billion euro against the Novembers 10.2 billion and the consensus of 10.0 billion euro.

Latest economic data from the U.S.

1) Producer Price Index: Year on year change in the PPI released at GMT 13:30 on Monday showed a drop to 1.3% against the previous release of 1.5% and also the consensus of 1.4%. Same was the case with  the producer price index ex-food & energy which showed a drop to 2.0% against the previous release of 2.2% and the consensus of 2.1%.

 2) Retail Sales: The retail sales climbed unexpectedly in December. The month on month change was 0.5% against the previous 0.3%. The consensus of the economists was for a drop to 0.2%. Retail sales ex-autos also saw an unexpected jump from the previous -0.1% to 0.3%. The consensus was for a growth to 0.2%.

3) Business Inventories: There was no change in the business inventories from the previous 0.3%.

Pressure On U.S. Dollar Continues During The Conflicts About Raising The Borrowing Limits

January 15, 2013 in Forex Fundamentals and News

EUR/USD Hesitating Below 1.3400After touching 1.3404 briefly EUR/USD has been hesitating to enter the psychological ranges of 1.3500. For past 22 hours the currency pair has been moving in a comparatively narrow range below 1.3400.

National debt and the pressure on dollar

There has been pressure on the U.S. dollar because of the ongoing conflict over raising the government’s borrowing limits. On Monday President Barak Obama again rejected any negotiations with the republicans about linking the raise on the borrowing limits to budget cuts. Republicans are asking for cuts in the government spending to allow any raise in the borrowing limits.

The current total national debt of U.S. is estimated to be US$ 16.44 trillion. As on January 10, 2013, debt held by the public was approximately US$11.577 trillion or about 73% of GDP. Intra-governmental holdings were $4.855 trillion, making the total debt as $16.432 trillion. Since September 2007 the national debt has been increasing at the rate of US$ 3.84 billion per day.

Default not seen far on the horizon

Last week’s projections of Bipartisan Policy Center which is based in Washington last week are that the U.S. Treasury will not have sufficient funds to pay all its bills sometime between Feb. 15 and March 1.

U.S. Treasury Secretary Timothy F. Geithner echoed the same projections that any failure to implement the raise in the borrowing limit will breach the debt ceiling sometime during mid-February to early March.

said so-called extraordinary measures he’s taking to avoid breaching the debt ceiling would work only until mid- February to early March and warned that failure by Congress to raise the limit could “impose severe economic hardship” on the country

EUR/USD price action and today’s economic  releases

EUR/USD Resistance levelsAfter failing below the psychological level of 1.3500 during the beginning of March 2012 EUR/USD could never manage to come near level. On March 1st 2012 it had gone as high as 1.3486 and had failed to test 1.3500. The currency pair had also found the resistance at the same 1.3486 level  on December 5th 2011. Considering these facts it is evident that 1.3500 territory becomes a big psychological barrier.

Today we have some important economic data to be released which may bring some volatile moves.

Today’s scheduled economic releases from Euro zone

1) Consumer Price Index and harmonized consumer price index from Germany at GMT 7:00: The consensus of economists are for an improvement in the German CPI data. The previous year on year change in the German CPI was 1.9%, the consensus is that the December data to be released today will seen a rise to 2.1%. The previous change in the year on year harmonized CPI was also 1.9% and the consensus for it also stand at 2.1% for today’s scheduled release.

2) German Gross Domestic Product: The GDP data from Germany is scheduled to be released at GMT 8:00. The previous year on year change was 0.4%.

3) European Monetary Union’s Trade Balance: The trade balance data is scheduled to be released at GMT 10:00 today.

Today’s scheduled economic releases from the U.S.

1) Producer Price Index: The PPI data is scheduled for GMT 13:30 today. The previous year on year change in the producer price index was 1.5%. The consensus is that today’s release will see a drop to 1.4%. The previous change in the producer price index ex-food & energy was 2.2% and a drop to 2.1% is expected in that too.

2) Retail Sales: A drop in month on month retail sales of December from previous 0.3% to 0.2% is being expected by the economist in the release scheduled at GMT 13:30 today.

3) Business Inventories: November’s business inventory report is scheduled today at GMT 15:00. October’s data had shown a figure of 0.4%, the consensus is for a drop to 0.3%.