EUR/USD – Euro Drops After Weak German Numbers

EUR/USD is lower in Thursday trading. The pair has dropped below the 1.37 level and is trading in the mid-1.36 line the European session. The euro has been under pressure throughout the course of the week and has lost about 150 points against the dollar. In economic news, ADP Non-Farm Payrolls was a major disappointment, dropping to a six-month low. As well, the Federal Reserve released a statement that it would maintain QE at current levels, given the performance of the US economy. Thursday is busy, and the major release of the day is Unemployment Claims. In the Eurozone, German releases continue to raise concerns, as Retail Sales and Consumer Climate fell short of expectations.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed's policy statement was less dovish than expected, as the Fed noted that the economy was expanding "at a moderate pace" and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

US employment data has struggled in recent releases, and there was no relief from ADP Non-Farm Payrolls on Wednesday. The key index dropped in September to 130 thousand, compared to 166 thousand the month before. This was well off the estimate of 151 thousand. It is the indicator's lowest level showing six months and underscores that the labor market is struggling to create new jobs. The markets will get another look at key employment data, with the release of Unemployment Claims later on Thursday. The markets are expecting an improvement from last week's reading.  US releases other than employment indicators are also pointing downwards, as inflation, consumer confidence and housing releases have not looked sharp this week. If confidence in the US economy starts to weaken, we could see the US dollar lose ground.

Back in the Eurozone, German releases continue to point downwards. On Thursday, Retail Sales recorded its third decline in four releases, and Consumer Climate and Import Prices both fell short of their estimates. Earlier this week, German Unemployment Change came in at 2 thousand in September, just above the estimate of 1 thousand. Although this is a decent reading, this is the indicator's third consecutive increase, raising concerns that the German economy is slowing down. The jobless rate was unchanged at 6.9 percent. If the Eurozone is to remain out of recession, it can ill afford for Germany, the region's number one economy, to slow down.

 

EUR/USD for Thursday, October 31, 2013

Forex Rate Graph 21/1/13

EUR/USD October 31 at 11:15 GMT

EUR/USD 1.3660 H: 1.3738 L: 1.3656

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3500 1.3585 1.3649 1.3786 1.3893 1.4000

 

  • EUR/USD has lost ground in Thursday trading. The pair fell below the 1.37 line early in the European session and continues to drop.
  • On the downside, 1.3649 is providing support. This line has weakened as the pair trades at lower levels. This is followed by a support line at 1.3585.
  • The pair continues to face resistance at 1.3786. It is followed by a resistance line at 1.3893.
  • 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, 1.4143 and 1.4247

 

OANDA's Open Positions Ratio

EUR/USD ratio is showing an increase in long positions in Wednesday trading, continuing a trend which began early in the week. This movement is not consistent with what we are seeing from the pair, as the euro dollar continues to lose ground. The ratio continues to be dominated by short positions, indicating a strong trader bias towards the US dollar moving higher against the euro.

EUR/USD has dropped below the 1.37 level, as the euro remains under strong pressure from the dollar. We could see further movement from the pair in the North American session, with the release of US Unemployment Claims.

 

EUR/USD Fundamentals

  • 7:00 German Retail Sales. Exp. 0.5%, Actual -0.4%.
  • 7:00 GfK German Consumer Climate. Exp. 7.3, Actual 7.0 points.
  • 7:00 German Import Prices. Exp. 0.2%, Actual 0.0%.
  • 7:45 French Consumer Spending. Exp. 0.2%, Actual -0.1%.
  • 9:00 Italian Monthly Unemployment Rate. Exp. 12.4%, Actual 12.5%.
  • 10:00 Eurozone CPI Flash Estimate. Exp. 1.1%.
  • 10:00 Eurozone Unemployment Rate. Exp. 12.0%.
  • 10:00 Italian Preliminary CPI. Exp. 0.4%.
  • 11:30 US Challenger Job Cuts.
  • 12:30 US Unemployment Claims. Exp. 341K.
  • 13:00 US Treasury Secretary Jack Lew Speaks.
  • 13:45 US Chicago PMI. Exp. 55.1 points.
  • 14:30 US Natural Gas Storage. Exp. 35B.

 

*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.

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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.