EUR/USD – Higher As Eurozone PMIs Paint Mixed Picture

EUR/USD has posted gains in Monday trading, as the pair trades in the high-1.37 range. In economic news, German and Eurozone PMIs were positive, while French PMIs missed their estimates. Later in the day, ECB President Mario Draghi will speak on monetary policy before a parliamentary committee in Brussels. In the US, today’s highlights include the Empire State Manufacturing Index and Industrial Production. 

It was a busy start to the week, as the Eurozone released a host of PMI numbers. Eurozone Service and Manufacturing PMIs remained above 50, which indicates expansion. German Flash Manufacturing PMI climbed to 54.2 points, while the Services PMI missed the estimate, but came in at a respectable 54.0 points. French PMIs looked weak, with the Manufacturing PMI dropping to 47.1 and the Services PMI coming in at 47.4 points. A reading below the 50-point level signals contraction.

US employment numbers have generally been solid recently, although last week’s disappointed, posting a nine-week high.  The Fed has said that a stronger employment picture is a prerequisite to tapering, and there is speculation that the Fed could make a move this week, although there’s a greater likelihood that we won’t see a taper until early next year. Still, the Fed policy meeting is the event of the week and will be closely monitored by the markets. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies.

There was some good news on the fiscal front last week, as the US House of Representatives easily passed a budget deal on Thursday. The agreement, which will be voted on by the Senate this week, removes the risk of another government shutdown next month and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the fiscal uncertainty we’ve seen in recent months.

EUR/USD for Monday, December 16, 2013

EUR/USD December 16 at 11:45 GMT

EUR/USD 1.3783 H: 1.3788 L: 1.3738

EUR/USD Technical

• EUR/USD has started the week with gains. The pair has been moving higher for most of the European session.
• On the downside, 1.3649 continues to provide support. This line has some breathing room as the pair trades at higher levels. This is followed by support at 1.3585.
• The pair is testing resistance at 1.3786. Will the improving euro break through this barrier? This is followed by a resistance line at 1.3893, which has remained intact since October 2011.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3500, 1.3410 and 1.3325
• Above: 1.3786, 1.3893, 1.4000 and 1.4140

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Monday trading. This is not reflected in the pair, as the euro has started the week with gains at the expense of the dollar. A large majority of the open positions remain short, indicative of a trader bias towards the dollar reversing directions and posting gains against the euro.

The euro has been strengthening in the European session. If this upward trend continues during the day, we could see EUR/USD test the 1.38 level.

EUR/USD Fundamentals

• 8:00 French Flash Manufacturing PMI. Estimate 49.1, points. Actual 47.1 points.
• 8:00 French Flash Services PMI. Estimate 48.9 points. Actual 47.4 points.
• 8:30 German Flash Manufacturing PMI. Estimate 53.1 points. Actual 54.2 points.
• 8:30 German Flash Services PMI. Estimate 55.2 points. Actual 54.0 points.
• 9:00 Eurozone Flash Manufacturing PMI. Estimate 51.9 points. Actual 52.7 points.
• 9:00 Eurozone Flash Services PMI. Estimate 51.5 points. Actual 51.0 points.
• 9:00 Italian Trade Balance. Estimate 1.24B. Actual 4.07B.
• 10:00 Eurozone Trade Balance. Estimate 15.2B. Actual 14.5B.
• 13:30 US Empire State Manufacturing Index. Estimate 4.9 points.
• 13:30 US Revised Nonfarm Productivity. Estimate 2.9%.
• 13:30 US Revised Unit Labor Costs. Estimate -1.5%.
• 14:00 ECB President Mario Draghi Speaks.
• 14:00 US Flash Manufacturing PMI. Estimate 54.9 points.
• 14:00 US TIC Long-Term Purchases. Estimate 31.4B.
• 14:15 US Capacity Utilization Rate. Estimate 78.5%.
• 14:15 US Industrial Production. Estimate 0.6%.

*Key releases are highlighted in bold

*All release times are GMT

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