EUR/USD – Quiet Ahead of US Key Events and Fed Minutes

EUR/USD is showing little movement in Wednesday trading, following gains on Tuesday. In Wednesday’s European session, the pair is trading in the mid-1.37 range. In economic news, German 10-year bonds posted their lowest yields in seven months. It will be a busy day over in the US, with the release of two key events – Building Permits and the Producer Price Index. As well, we’ll get a look at the minutes of the most recent Federal Reserve meeting.

US numbers have not impressed in 2014. Retail Sales weakened in January, and the hiccups continue on the employment front, as Unemployment Claims were higher than expected last week. On Tuesday, the culprit was the Empire State Manufacturing Index. The important manufacturing indicator slid to 4.5 points in January, down sharply from 12.5 a month earlier. The estimate stood at 9.9 points. If the markets don’t see some improvement soon, the dollar could lose ground to its major rivals.

The Federal Reserve will release the minutes of its last policy meeting later on Wednesday, and traders should pay attention, as this event has been a market-mover in the past. At its last meeting, the Fed trimmed QE by another $10 billion, reducing the bond-buying scheme to $65 billion each month. Fed chair Janet Yellen has said that QE could be winded up by the end of 2014, provided that the economy behaves and there are no sudden downturns, particularly on the employment front.

The news was not good out of Germany on Tuesday, as ZEW Economic Sentiment, a key event, slipped to a three-month low, dropping to 55.7 points in January, compared to 61.7 a month earlier. The estimate stood at 61.3. The Eurozone reading followed suit, dropping from 73.3 to 68.5 points, way short of the estimate of 73.9. Although these levels are relatively high, the fact that institutional investors and analysts, who know a thing or two about the economy, are less optimistic is a reason for concern, and a slowing down of the German locomotive would spell serious trouble for the Eurozone.

The ECB did not make any moves at is last policy meeting, but there has been increasing talk of negative deposit rates (currently these are at zero), and a few ECB members have gone on the record stating that negative rates are on the table. These sentiments are bearish for the euro, since negative rates would likely lead to investors choosing currencies with more attractive rates. If inflation indicators do not pick up, the ECB my have to take action at its next meeting in March.

 

EUR/USD for Wednesday, February 19, 2014

Forex Rate Graph 21/1/13

EUR/USD February 19 at 11:15 GMT

EUR/USD 1.3748 H: 1.3774 L: 1.3746

 

EUR/USD Technical

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

 

  • EUR/USD has edged lower in Wednesday trading.
  • 1.3649 continues in a support role. The next support line is at 1.3585.
  • 1.3786 is the next line of resistance. This line could face pressure if the euro posts gains. Next, there is resistance at 1.3893.
  • Current range: 1.3649 to 1.3786

Further levels in both directions:

  • Below: 1.3649, 1.3585, 1.3410, 1.3347 and 1.3255
  • Above: 1.3786, 1.3893, 1.4000 and 1.4149.

 

OANDA’s Open Positions Ratio

EUR/USD ratio continues the trend of gains in short positions. Since the start of the month, short positions have posted strong gains and currently comprise a strong majority. This is consistent with the sharp gains of the euro in February, which has led to numerous long positions being covered, resulting in a greater percentage of open short positions. The current ratio, which favors short positions, is indicative of trader bias towards the dollar moving higher against the euro.

The euro continues to trade at high levels on Wednesday. EUR/USD is steady in the European session. We could see some movement in the North American session, as the US releases Building Permits, PPI and the Federal Reserve minutes.

 

EUR/USD Fundamentals

  • 10:34 German 10-year Bond Auction. Actual 1.64%.
  • 13:30 US Building Permits. Estimate 0.98M.
  • 13:30 US PPI. Estimate 0.2%.
  • 13:30 US Core PPI. Estimate 0.2%.
  • 13:30 US Housing Starts. Estimate 0.95M.
  • 19:00 US FOMC Minutes.

*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.