EUR/USD – Lower As Euro GDP Releases Disappoint

EUR/USD has lost ground in Thursday trading, as the pair trades in the low-1.34 range in European trading. It’s been a very quiet week so far, but the markets will have plenty of data to work through on Thursday. Taking a look at today’s economic releases, Eurozone GDP disappointed, posting a weak gain of just 0.1% in October. In the US, there are two key releases – Trade Balance and the all-important Unemployment Claims. As well, incoming Federal Reserve Chair Janet Yellen will testify before the Senate Banking Committee, ahead of her confirmation hearing.

The Eurozone continues to be marked by weak growth, and this was underscored by Thursday’s GDP numbers. Eurozone Flash GDP gained just 0.1%, short of the estimate of 0.2%. French and Italian Preliminary GDP both declined by 0.1%, missing their estimates. German Preliminary GDP managed to match the forecast of 0.3%, but this figure was sharply lower than the September reading, which posted a gain of 0.7%. The ECB lowered interest rates last week in an attempt to improve economic growth, and the markets will be waiting to see if upcoming releases respond positively to the rate cut.

One of the sore spots in the Eurozone economy has been the manufacturing sector, as underscored by a weak Eurozone Industrial Production release on Wednesday. The important indicator declined 0.5%, falling short of the estimate of -0.2%. It was the second decline in the past three readings. Earlier in the week, Italian Industrial Production posted a paltry gain of just 0.2%, matching the estimate. If Eurozone growth remains sluggish, traders can expect the euro to remain under strong pressure from the US dollar.

The Greek government has imposed sharp austerity measures to get its fiscal house in order, but stumbling blocks remain on what continues to be a very bumpy road to economic recovery. The troika has promised Greece another installment of aid worth 1 billion euros, but wants to see the country plug a 2 billion euro hole in its 2014 budget. The Greek government has rejected tax hikes or cuts in wages or pensions, which will make it difficult to eliminate this deficit. The troika has already provided Greece with some 240 billion euros in aid since 2010 and is insisting that the government stay within its 2014 budget, and has threatened to suspend the next installment until Athens takes further steps to keep costs under control. We can expect the tug-of-war between the sides to continue for some time.

Incoming Federal Reserve head Janet Yellen will testify before the powerful Senate Banking Committee on Thursday. The hearing could be a rough one for Yellen, as Republicans are expected to grill her on the Fed’s QE program, which they oppose. Yellen is considered dovish in her monetary outlook and supported Bernard Bernanke in implementing QE, which currently stands at $85 billlion each month. On Wednesday, Yellen said that the economy is not performing up to its potential and unemployment remains too high.

EUR/USD for Thursday, November 14, 2013

EUR/USD November 14 at 12:20 GMT

EUR/USD 1.3438 H: 1.3495 L: 1.3418

EUR/USD Technical

• EUR/USD has posted losses in Thursday trading as the dollar continues to put pressure on the euro.
• EUR/USD is receiving support at 1.3410. This weak line could face strong pressure during the day. This is followed by a support level at 1.3325.
• The pair is facing resistance at the round number of 1.3500. This is followed by a resistance line at 1.3585, which has held firm since late October.
• Current range: 1.3410 to 1.3500

Further levels in both directions:

• Below: 1.3410, 1.3325, 1.3265, 1.3149 and 1.3049
• Above: 1.3500, 1.3585, 1.3649 and 1.3786

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed direction, pointing to gains by long positions. This is not reflected in the pair’s movement, as the euro has posted losses on Thursday. A large majority of the open positions remain short, indicative of a trader bias towards the dollar continuing to post gains against the euro.

The euro continues to trade in the mid-1.34 range. We could see some strong movement from the pair during the North American session, as the US releases trade balance and unemployment data later in the day.

EUR/USD Fundamentals

• 6:30 French Preliminary GDP. Estimate 0.1%. Actual -0.1%.
• 7:00 German Preliminary GDP. Estimate 0.3%. Actual 0.3%.
• 7:45 French Preliminary Non-Farm Payrolls. Estimate -0.1%. Actual -0.1%.
• 7:45 French CPI. Estimate 0.0%. Actual -0.1%.
• 9:00 ECB Monthly Bulletin.
• 9:00 Italian Preliminary GDP. Estimate -0.2%. Actual -0.1%.
• 10:00 Eurozone Flash GDP. Estimate 0.2%. Actual 0.1%.
• All Day – Eurogroup Meetings.
• 12:00 Federal Chairman Bernard Bernanke Speaks.
• 13:30 US Trade Balance. Estimate -38.7B.
• 13:30 US Unemployment Claims. Estimate 331K.
• 13:30 US Preliminary Non-Farm Productivity. Estimate 1.3%.
• 13:30 US Preliminary Unit Labor Costs. Estimate 1.1%.
• 15:00 Federal Reserve Chairperson-Designate Janet Yellen Testifies. Yellen will testify before the Senate Banking Committee.
• 15:30 US Natural Gas Storage. Estimate 21B.
• 16:00 US Crude Oil Inventories. Estimate 0.7M.
• 18:01 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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