EUR/USD – Modest Gains in Thin Holiday Trade

EUR/USD has edged higher in Thursday trading. The pair is trading just below the 1.37 line in the European session. Trade is expected to be light the day after Christmas, with German and French markets closed. In the US, there is just one event on the schedule, Unemployment Claims. The key employment indicator has been higher than the estimate for the past two releases, so the markets will be hoping for a turnaround in the upcoming release. On Tuesday, US key releases looked sharp, as Core Durable Goods Orders and New Home Sales improved in November and beat their estimates.

There was some holiday cheer from US releases on Tuesday, as manufacturing and housing numbers pointed upwards. Core Durable Goods Orders posted a strong gain of 1.2%, its best showing since April. The key manufacturing indicator had posted four consecutive declines, so the sharp gain was welcome news. Durable Goods Orders bounced back from a sharp decline in October with a gain of 3.5%, well above the estimate of 1.7%. New Homes Sales also impressed with a five-month high, climbing to 464 thousand. The estimate stood at 449 thousand.

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. French Services and Manufacturing PMIs for November pointed to contraction, while Industrial Production continues to post declines.

The year ended on a dramatic note as the Federal Reserve announced last week that it would begin tapering its $85 billion QE program by $10 billion, 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.

In its 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. With the US unemployment rate at 7.0%, it appears a safe bet that we won’t see any change in US rates for quite some time.

 

EUR/USD for Thursday, December 26, 2013

Forex Rate Graph 21/1/13

EUR/USD December 26 at 9:10 GMT

EUR/USD 1.3693 H: 1.3702 L: 1.3666

 

EUR/USD Technical

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

 

  • EUR/USD has edged higher in Thursday trading. The pair briefly crossed above the 1.37 line earlier in the European session.
  • On the downside, 1.3649 continues to provide support. This is followed by a support level at 1.3585.
  • 1.3786 is providing resistance. 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 Thursday trading, continuing the trend we have seen all week. This is not consistent with the pair’s current movement, as the euro has posted modest gains against the dollar. A large majority of the open positions are short, indicative of a trader bias towards the dollar reversing directions and moving to higher ground.

The euro has moved up slightly and is trading just below the 1.37 line. We could see some stronger movement from the pair in the North American session, as the US releases Unemployment Claims later in the day.

 

EUR/USD Fundamentals

  • 13:30 US Unemployment Claims. Estimate 346K.

 

*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.