EUR/USD

After a busy holiday period, EUR/USD has started off 2014 with losses. The pair shed 100 points on Thursday and continues to point downward in Friday trading. In the European session, the pair is trading in the low-1.36 range. Economic releases have started the year on a positive note, as European Manufacturing PMIs pointed to expansion in Spain, Italy, and the Eurozone. In the US, Unemployment Claims and ISM Manufacturing PMI met market expectations. On Friday, Spanish Unemployment Claims sparkled, dropping by 107 thousand. In the US, a host of FOMC members will be speaking, including outgoing Fed chairman Bernard Bernanke.

With a rickety economy and sky-high unemployment, Spain is often in the news for the wrong reasons, but Spanish releases have been a pleasant surprise early in the year. On Friday, Unemployment Change sparkled, dropping by 107.6 thousand, crushing the estimate of 24.3 thousand. This was the best reading ever in the month of December. Earlier in the week, Manufacturing PMI crossed above the 50-point level, indicating expansion. We’ll see if Spanish Services PMI can keep up the pace when it’s released early next week.

US Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand.  The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released next week. The NFP could impact the next Fed decision as to QE, after 2013 ended with QE tapering. While it was a small move, lowering asset purchases from $85 billion to $75 billion each month, the Fed did make a significant change its monetary policy, and this could have a significant positive impact on the US dollar.

Latvia joined the Eurozone on January 1, becoming the 18th member of the bloc. With a population of just two million, Latvia will be one of the smallest economies in the Eurozone. Although many Latvians are not enthusiastic about adopting the continental currency, there were immediate benefits to the move, as the S&P and Fitch ratings agencies raised the country’s credit rating. There are now some 333 million people are now using the euro, which is the US dollar’s chief rival.

EUR/USD for Friday, January 3, 2014

EUR/USD January 3 at 10:00 GMT

EUR/USD 1.3648 H: 1.3672 L: 1.3629

EUR/USD Technical

• EUR/USD has posted losses modest losses in Friday trading. The pair touched a low of 1.3629 earlier in the European session.
• The pair is testing support at 1.3649 and we could see this line break during the day. This is followed by a stronger support line at 1.3585.
• 1.3786 is the next line of resistance. It has some breathing room as the euro trades at lower levels. This is followed by resistance at 1.3893, which is protecting the 1.39 line.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3500 and 1.3410
• Above: 1.3786, 1.3893, 1.4000, 1.4140 and 1.4268

OANDA’s Open Positions Ratio

EUR/USD ratio continues to point to gains in long positions in Friday trading. This is not consistent with what we are seeing from the pair, as the euro has lost more ground against the dollar. The ratio is still made up largely of short positions, indicative of a trader bias towards the dollar continuing to move to higher ground.

The euro has had a rough week, losing over one cent against the dollar. EUR/USD has posted modest losses in Friday trading and movement during the North American session could be limited.

EUR/USD Fundamentals

• 8:00 Spanish Unemployment Change. Estimate 24.3K. Actual -107.6K.
• 9:00 Eurozone M3 Money Supply. Estimate 1.5%. Actual 1.5%.
• 9:00 Eurozone Private Loans. Estimate -1.9%. Actual -2.3%.
• 10:00 Italian Preliminary CPI. Estimate 0.3%. Actual 0.2%.
• 15:30 US Natural Gas Storage. Estimate -125B.
• 16:00 US Crude Oil Inventories. Estimate -2.3M.
• All Day – US Total Vehicle Sales. Estimate 16.0M.
• 17:45 US FOMC Member Charles Plosser Speaks.
• 18:15 US FOMC Member Jeremy Stein Speaks.
• 19:30 US Fed Chairman Bernard Bernanke Speaks.

*Key releases are highlighted in bold

*All release times are GMT