EUR/USD – Little Activity Ahead of Christmas Break

EUR/USD continues to trade quietly ahead in Tuesday trading. In the European session, the pair is trading in the mid-1.36 range. In the Eurozone, the only release today is French Consumer Spending. The indicator surprised the markets with a strong gain of 1.4%. In the US, there are two key events on the schedule – Core Durable Goods Orders and New Home Sales. The markets are expecting both indicators to show a rise in the November reading.

French numbers have not looked very good of late, so Tuesday’s Consumer Spending data was a pleasant surprise. The indicator posted a gain of 1.4%, its strongest gain since September 2010.Four of the five past releases have been declines, and the November estimate stood at 0.3%. The solid reading comes after a string of poor releases from the Eurozone’s second largest economy. Services and Manufacturing PMIs for November pointed to contraction, while Industrial Production continues to post declines.

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.

 

EUR/USD for Tuesday, December 24, 2013

Forex Rate Graph 21/1/13

EUR/USD December 24 at 11:15 GMT

EUR/USD 1.3676 H: 1.3698 L: 1.3673

 

EUR/USD Technical

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

 

  • EUR/USD is showing little movement on Tuesday, continuing the trend we saw a day earlier. The pair touched a high of 1.3713 early in the Asian session but has dropped back below the 1.37 line.
  • 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 1.3585.
  • 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 pointing to slight gains in short positions in Tuesday trading. This is consistent with what we are seeing from the pair, as the euro has edged lower. A large majority of the open positions are short, indicative of a trader bias towards the dollar posting gains against the euro.

The euro continues to trade quietly on Tuesday. We could see stronger movement from EUR/USD later in the day, as the US releases key housing and manufacturing data later in the day.

 

EUR/USD Fundamentals

  • 7:45 French Consumer Spending. Estimate 0.3%. Actual 1.4%.
  • 13:30 US Core Durable Goods Orders. Estimate 0.9%.
  • 13:30 US Durable Goods Orders. Estimate 0.9%.
  • 14:00 US HPI. Estimate 0.5%.
  • 15:00 US New Home Sales. Estimate 449K.
  • 15:00 US Richmond Manufacturing Index. Estimate 15 points.

 

*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.

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.