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EUR/USD Erases Gains Even amid Favorable Fundamentals

January 22, 2013 by

EUR/USD was volatile today as it dropped sharply, quickly bounced after that, yet fell below the opening level later. Fundamental news was positive for the euro as German economic sentiment improved much more than was expected and Greece received another tranche of the bailout. But that did not help the currency. The data from the United States was less favorable as reports came out worse than market participants have hoped.

Richmond Fed manufacturing index fell from 5 in December to -12 in January. Specialists have thought that the index would stay little-changed at 4. (Event A on the chart.)

Existing home sales were at the seasonally adjusted level of 4.94 million in December, a bit lower that the November’s 4.99 million (revised from 5.04 million). That is compared to the median forecast of 5.09 million. (Event A on the chart.)

On January 18, a preliminary report on Michigan Sentiment Index was released, showing an unexpected drop from 72.9 in December (revised from 74.5) to 71.3 in January. That was a total surprise and unpleasant one as analysts have expected an increase to 75.1. (Not shown on the chart.)

EUR/USD for 2013-01-22

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