EUR/USD – Euro Firm Ahead of Yellen Testimony

EUR/USD has edged higher on Tuesday, as the pair trades in the mid-1.36 range in the European session. There are no Eurozone releases today, but there are two major events out of the US later today. Incoming Federal Reserve Chair Janet Yellen will testify about the Fed’s Semiannual Monetary Policy Report before the House Financial Services Committee. We’ll also get a look at JOLT Job Openings. The key employment release has been moving higher in recent readings, and the markets are expecting the upward trend to continue in the January release. There are no Eurozone releases on Tuesday.

Incoming Federal Reserve Chair Janet Yellen took over the reins of the Fed last week, and heads to Congress on Tuesday to present her first semi-annual testimony in front of the House Financial Services Committee. She is expected to reiterate the Fed’s plan to continue its taper of QE and wind up the stimulus program by the end of the year, despite recent weakness in the economy and some worrying NFP numbers. Traders should be prepared for some fluctuation from EUR/USD following Yellen’s remarks.

The euro continues to trade at high levels, although Monday’s Eurozone releases did not impress. Eurozone Industrial Production looked weak in January. The French release posted a decline of 0.3%, shy of the estimate of -0.1%. This was the third decline in four readings, pointing to weak activity in the French manufacturing sector. Italian Industrial Production headed south after three straight gains, with a decline of 0.9%. The markets had expected a reading of 0.0%. We’ll need to see stronger economic data if the Eurozone economy is to improve.

On Friday, the markets were treated to another disappointing Nonfarm Payrolls release. The key employment indicator improved to 113 thousand, but this was well of the estimate of 185 thousand. The fact that the euro was unable to post gains against the dollar on Friday point to the high regard the markets have for the strength of the US economy. There was some good news as well on the employment front, as the Unemployment Rate dipped to 6.6%, its lowest level in over five years. The markets are keeping a close eye on JOLT Job Openings, which will be released later on Tuesday.

With the Eurozone affected by very weak inflation, ECB head Mario Draghi’s options are limited. With the benchmark interest rate at a record low level of 0.25%, the ECB opted not to lower rates last week. There was talk that the ECB might reduce deposit rates below zero. Such a move would likely hurt the euro due to investors dumping their euros in favor of other currencies. When the ECB stood pat, the euro jumped, gaining about a cent after Draghi’s press conference. Draghi then reiterated what we’ve heard many times over, that for the foreseeable future interest rates will stay at their current levels or could dip even lower. What action, if any, the ECB takes when it sets rates in March will be heavily influenced by the inflation situation in the Eurozone. If inflation weakens further, the ECB will be under strong pressure to make a move.

 

EUR/USD for Tuesday, February 11, 2014

Forex Rate Graph 21/1/13

EUR/USD February 11 at 11:15 GMT

EUR/USD 1.3672 H: 1.3683 L: 1.3644

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3410 1.3585 1.3649 1.3786 1.3893 1.4000

 

  • EUR/USD has posted slight gains on Tuesday. The pair touched a high of 1.3683 early in the European session.
  • 1.3649 has reverted to a support role. This is  a weak line which could be tested during the day. The next support line is at 1.3585.
  • 1.3786 is the first line of resistance. There is stronger resistance at 1.3893, which is protecting the 1.39 line.
  • Current range: 1.3649 to 1.3786

Further levels in both directions:

  • Below: 1.3649, 1.3585, 1.3410 and 1.3347
  • Above: 1.3786, 1.3893, 1.4000 and 1.4149

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions, continuing the trend we saw a day earlier. This is not reflected in the pair’s current movement, as the euro has edged higher against the dollar. Short positions enjoy a strong majority in the ratio, indicative of trader bias towards the dollar reversing directions and moving higher against the euro.

The euro continues to trade at high levels on Tuesday. We could see some movement from EUR/USD during the North American session, as Janet Yellen testifies before Congress and the US releases key employment data later in the day.

 

EUR/USD Fundamentals

  • 12:30 US NFIB Small Business Index. Exp. 93.6 points.
  • 14:00 US FOMC Member Charles Plosser Speaks.
  • 15:00 US Fed Chair Janet Yellen testifies before the House Financial Services Committee.
  • 15:00 US JOLTS JOB Openings. Exp. 4.04M.
  • 15:00 US Wholesale Inventories. Exp. 0.5%.

 

*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.