EUR/USD trades little changed, Fed stimulus in focus

The euro traded little changed against the US dollar on Monday, after worse-than-expected US employment data released on Friday lowered the bets for further Fed tapering.

Having touched a session high at 1.3685 at 03:45 GMT, EUR/USD traded little changed at 1.3663 at 10:32 GMT, losing 0.04% for the day. Support was likely to be received at January 10th low, 1.3574, while resistance was to be encountered at January 2nd high, 1.3775.

The greenback continued to be pressured after worse-than-expected employment data eased concerns the Federal Reserve might reduce further its monthly bond purchases at FOMC’s upcoming meeting. The Fed monetary stimulus program tends to devalue the US dollar.

The Department of Labor reported on Friday that US employers added 74 000 jobs in December, the least since January 2011, sharply underperforming expectations for a moderate retreat in job creation to 196 000 payrolls. November’s reading received an upward revision to 241 000 from initially estimated at 203 000.

On the other hand, the rate of unemployment in the country dropped significantly, reaching 6.7% in December from 7.0% in the preceding month, marking the lowest rate since October 2008. However, this came as a result of a larger percentage of US citizens leaving nation’s work force. Preliminary estimates pointed that US unemployment rate will remain unchanged in December.

Fed decided on December 18th to cut its monthly bond purchases by $10 billion to $75 billion, this month, citing improvements in the labor market. Fed Chairman Ben Bernanke said, regarding this decision, that Fed will probably continue to do a measured reduction in the pace of purchases at each meeting. According to a Bloomberg News survey of economists conducted on December 19, policy makers will cut Fed’s stimulus in $10 billion increments over the next seven committee meetings.

Investors awaited the release of a report on the US Federal Budget Balance for December, which may reveal a surplus of $44.3 billion, following the deficit of $135.23 billion in the preceding month. Atlanta Fed President Dennis Lockhart is also expected to speak later today.

Meanwhile, the euro received some support after data revealed the Spanish Business Confidence increased to 113.9 in the first quarter from 113 in the last quarter of 2013. The Business Confidence Indicator is based on a survey among managers of 8 000 companies, who are asked to assess the overall performance of their companies during the last quarter, as well as to share their expectations for the current quarter.

A separate report revealed the Italian industrial production slowed its pace in November to 0.3% from 0.5% in the previous month. Analysts had expected the pace of the industrial production will increase to 0.6%. However, the industrial production increased by an annualized rate of 1.4% in November, after it declined by 0.5% in the preceding month.

Elsewhere, having hit a session low at 103.26 at 02:15 GMT, USD/JPY traded at 103.37 at 09:51 GMT, losing 0.77% for the day. Support was likely to be received at December 18th low, 102.64, while resistance was to be encountered at January 10th high, 105.31.