EUR/USD – Steady as Markets Eye US Consumer Confidence

EUR/USD continues to trade quietly, continuing the lack of activity we saw on Monday, with the US markets closed for the Memorial Day holiday. The pair is trading in the low-1.29 range, and dipped below the 1.29 line earlier. In economic news, German Import Sales disappointed, falling well short of the estimate. The markets will have their first look at key US data later on Tuesday, as the US releases CB Consumer Confidence.

There is a lot of truth to the motto “as goes Germany, so does Europe” when it comes to economic developments. After some lukewarm PMI data out of Germany last week, there was better news on Friday. German Consumer Climate had its best showing since 2007, and IFO Business Climate rose as well. German GDP showed improvement in Q4, posting a modest 0.1% gain. German Import Prices failed to keep pace on Tuesday, as the third-tier release dropped 1.4%, its worst showing since July 2012. The markets had expected a modest drop of -0.2%. We’ll get a better picture of the direction of the Eurozone’s largest economy on Wednesday, as Germany releases CPI, Unemployment Change and Retail Sales. If these indicators point upwards, the shaky euro could get a boost.

Recent comments from the ECB about adopting negative interest rates have impacted on the euro, and ECB Mario Draghi and other policymakers have expressed a willingness to consider the idea. At present, the ECB’s deposit rate stands at zero. On Monday, ECB Executive Board member Joerg Asmussen said that the ECB will continue it expansive monetary policy in order to boost the Eurozone economy, but urged caution on the question of negative rates. Asmussen warned that the ECB can’t simply fix uncompetitive economies by changing its monetary policy, such as the adopting negative interest rates. We’re likely to see more discussion about negative deposit rates, but there will be some sharp debating within the ECB before any moves are taken in this direction.

The markets are accustomed to ups and downs in US numbers, which has typified US releases in 2013. Last week saw mixed housing numbers, as Existing Home Sales missed the estimate, but New Home Sales looked very sharp. Unemployment Claims bounce back with a strong release, and the week ended with a rise in Core Durable Goods Orders. The mix of positive and weak releases churned out by the US has made it difficult to assess the extent of the economic recovery. The US Federal Reserve has hinted at scaling back QE, but has opted to stay the course with the current round of QE, which involves $85 billion in asset purchases each month.

 

EUR/USD for Tuesday, May 28, 2013

Forex Rate Graph 21/1/13
EUR/USD May 28 at 11:10 GMT

EUR/USD 1.2934 H: 1.2936 L: 1.2885

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2689 1.2753 1.2843 1.2955 1.3000 1.3050

 

EUR/USD continues to trade quietly. The pair continues to receive strong support at 1.2843. The next support level is at 1.2753. On the upside, the pair is facing resistance at 1.2955. This line could be tested if the euro shows some upward movement. There is a stronger resistance at the round number of 1.3000.

  • Current range: 1.2843 to 1.2955

 

Further levels in both directions:

  • Below: 1.2843, 1.2753, 1.2689, 1.2589 and 1.2500
  • Above: 1.2955, 1.3000, 1.3050, and 1.31

 

OANDA’s Open Positions Ratio

EUR/USD ratio is not showing any movement in Tuesday trading. This is reflected in the pair, which has shown very little net movement. The ratio is very close to an even split between short and long positions, indicating a split in trader sentiment as what to expect from EUR/USD.

US markets are back in action, but EUR/USD continue to stay close to the 1.2930 line. With the US releasing key consumer data later in the day, a reading which is not in line with market expectations could shake up the pair.

 

EUR/USD Fundamentals

  • 6:00 German Import Prices. Estimate -0.2%. Actual -1.4%.
  • 13:00 US S&P/CS Composite-20 HPI.
  • 14:00 US CB Consumer Confidence. Estimate. 70.7 points. 
  • 14:00 US Richmond Manufacturing Index. Estimate 2 points.

 

*Key releases are highlighted in bold

*All release times are GMT

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.