EUR/USD – Almost Unchanged Ahead of ECB Meeting

EUR/USD is almost unchanged in Thursday trading, as the pair continues to trade in the low-1.35 range in the European session. The markets are keeping a close eye on the ECB policy meeting on Thursday. In economic news, German Industrial Production was well short of the estimate. Over in the US, today’s key releases are Advance GDP and Unemployment Claims.

Will the ECB reduce interest rates at its policy meeting on Thursday? This hasn’t happened since April, but weak growth and low inflation could force the ECB into action. The argument against cutting interest rates is that with rates already at a record low of 0.50%, a cut of 0.25% might not have much impact. Other tools available to the ECB include a new LTRO or introducing a negative deposit rate. Another scenario is that the ECB will not take action, but will hint that a rate cut could occur in December.

Inflation indicators in the Eurozone continue to point to very weak inflation, which in turn signals sluggish economic activity. Eurozone CPI dropped to 0.7% in October, its smallest gain in three years. Eurozone PPI posted a paltry gain of 0.1%, shy of the estimate of 0.3%. Germany, the region’s largest economy, is also producing inflation numbers well below the ECB’s inflation target of 2.0%. Speculation is growing that the ECB could cut rates in order to boost growth and nudge inflation to higher levels.

Germany is the Eurozone’s largest economy, so the Eurozone and the euro are sensitive to German releases. This week’s data has been a mixed bag, making it difficult to predict in which direction the German economy is headed. Factory Orders jumped 3.3% in October, bouncing back from a decline of 0.3% in September. This was well above the estimate of 0.6%. However, Industrial Production failed to keep pace, posting a decline of 0.9%, compared to a strong 1.4% the month before. The estimate stood at 0.2%. We’ll get a look at Trade Balance on Friday.

US key releases have started the week on a positive note. The ISM Non-Manufacturing PMI rose to 55.4 points in October, up from 54.4 the month before. This beat the estimate of 54.0 points. We’ll get a look at Unemployment Claims and Non-Farm Payrolls later in the week, and if these numbers are strong, there is sure to be talk of QE tapering in December, as the Fed has said on numerous occasions that the employment market must improve before QE tapering can occur.

EUR/USD for Thursday, November 7, 2013

EUR/USD November 7 at 12:00 GMT

EUR/USD 1.3510 H: 1.3529 L: 1.3501

EUR/USD Technical

• EUR/USD is rangebound in Thursday trading, as the pair trades just above the 1.35 line.
• On the downside, 1.3500 remains fluid and continues to see activity. This is followed by a stronger support line at 1.3410.
• The pair continues to face resistance at 1.3585. Next there is a resistance line at 1.3649.
• Current range: 1.3500 to 1.3585

Further levels in both directions:

• Below: 1.3500, 1.3410, 1.3325, 1.3265 and 1.3149
• Above: 1.3585, 1.3649, 1.3786 and 1.3893

OANDA’s Open Positions Ratio

EUR/USD ratio is showing movement towards short positions in Thursday trading. This is not reflected in the current movement of the pair, which is rangebound.

EUR/USD is showing very little movement on Thursday. We could see this change during the day, with the rate announcement and press conference following the ECB policy meeting. As well, the US will release key GDP and employment numbers, which could cause some volatility from EUR/USD.

EUR/USD Fundamentals

• 9:43 Spanish 10-year Bond Auction. Actual. 4.16%.
• 9:58 French 10-year Bond Auction. Actual 2.41%.
• 11:00 German Industrial Production. Estimate 0.2%
• 12:45 ECB Minimum Bid Rate. Estimate 0.50%.
• 13:30 ECB Press Conference.
• 13:30 US Advance GDP. Estimate 2.0%.
• 13:30 US Unemployment Claims. Estimate 336K.
• 13:30 US Advance GDP Price Index. Estimate 1.5%.
• 15:30 US Natural Gas Storage. Estimate 40B.
• 18:30 FOMC Member William Dudley Speaks.
• 18:50 FOMC Member Jeremy Stein Speaks.
• 19:00 ECB President Mario Draghi Speaks. Draghi will address an economic forum in Hamburg.
• 20:00 US Consumer Credit. Estimate 13.0B.

*Key releases are highlighted in bold

*All release times are GMT

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