EUR/USD – Almost Unchanged to Start off Week

EUR/USD ended last week on a quiet note and this pattern is continuing on Monday, as the pair trades in the high-1.36 range in the European session. In economic news, it’s a fairly quiet start to the week, with no major releases on the schedule. In the Eurozone, German Import Prices posted a slight gain of 0.1%. Today’s highlight out of the US is UoM Consumer Sentiment. The markets are expecting a strong reading for November, with an estimate of 82.9 points.

Last week ended on a positive note, as US GDP climbed 4.1% in Q3, compared to 2.6% in the previous quarter. This was the indicator’s sharpest gain since Q1 of 2010. The estimate stood at 3.6%. This excellent figure help push up the dollar, which had already posted sharp gains against the euro following the Fed’s taper announcement. Meanwhile, Unemployment Claims jumped to 379 thousand claims last week, up from 368 thousand the week before. This was well above the estimate of 336 thousand. The previous release’s weak numbers were attributed to the holiday season, but two consecutive poor releases will certainly not comfort the markets. There was more bad news to follow, as Existing Home Sales and the Philly Fed Manufacturing Index fell short of their estimates.

The markets are still buzzing after last week’s announcement by the Federal Reserve that it would begin tapering its QE program by $10 billion a month, commencing in January. This will reduce the Fed’s asset purchases to $75 billion every month, comprised of $40 billion in Treasuries and $35 billion in mortgage bonds. The announcement came as somewhat of a surprise, as most analysts had expected the Fed to hold off on any QE reductions until early next year. The high-flying euro dropped over one cent after the news and remains under pressure.

In its dramatic tapering announcement, the Federal Reserve was careful to separate tapering from rate hike expectations. Fed chairman Bernard Bernanke stated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%. Previously, the Fed had stated that it would start to consider rate increases when unemployment fell below this level. Bottom line? With the US unemployment rate at 7.0%, it could be a while before we see higher interest rates in the US.

Overshadowed by the Fed’s bombshell announcement, a two-year, bipartisan budget agreement is sailing through Congress. The deal was overwhelmingly approved in the House of Representatives last week and the Senate followed suit on Wednesday, passing the measure by a vote of 64-36. The bill will now go the President Obama for his signature before becoming law. The agreement sets limits on government spending for two years 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 the threat of a shutdown which paralyzed the government in October for 16 days.

EUR/USD for Monday, December 23, 2013

EUR/USD December 23 at 11:20 GMT

EUR/USD 1.3683 H: 1.3695 L: 1.3673

EUR/USD Technical

• EUR/USD is showing little movement in Monday trading. The pair touched a high of 1.3695 early in the Asian session.
• On the downside, there is weak support at 1.3649. This line could face pressure if the euro loses ground. This is followed by a stronger support level at 1.3595.
• 1.3786 is providing resistance. This 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, 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 consistent with what we are seeing from the pair, which is showing very little movement. A large majority of the open positions are short, indicative of a trader bias towards the dollar breaking out and continuing to post gains against the euro.

The euro continues to trade quietly on Monday. With no major US releases on Monday, it could be a quiet North American session for the EUR/USD.

EUR/USD Fundamentals

• 7:00 German Import Prices. Estimate 0.4%. Actual 0.1%.
• 13:30 US Core PCE Price Index. Estimate 0.1%.
• 13:30 US Personal Spending. Estimate 0.5%.
• 13:30 US Personal Income. Estimate 0.4%
• 14:00 Belgian NBB Business Climate. Estimate -3.9 points.
• 14:55 US Revised UoM Consumer Sentiment. Estimate 82.9 points.
• 14:55 US Revised UoM Consumer Inflation Expectations.

*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.