EUR/USD – Euro Shrugs Off Weak PMIs

The euro continues to trade at high levels, as EUR/USD remains above the 1.37 on Friday. The euro is holding its own despite weak Eurozone numbers on Thursday, as PMIs did not impress and inflation indicators posted declines. Over in the US, Unemployment Claims and Core CPI met expectations, but the Philly Fed Manufacturing Index slumped to a nine-month low. Friday is quiet on the release front, with the markets keeping a close eye on US Existing Home Sales. There are no Eurozone events on Friday.

US numbers were a mix on Thursday. Unemployment Claims dropped slightly last week, coming in at 336 thousand. This was just shy of the estimate of 335 thousand. After some recent weak releases on the employment front, the markets will be pleased with this release. Meanwhile, inflation indicators continue to raise concerns, as Core CPI posted a paltry gain of 0.1% for the second straight month. Weak inflation levels are indicative of weak economic growth and could spell trouble for the US recovery. On the manufacturing front, the Philly Fed Manufacturing Index slumped badly, posting a decline of -6.3 points, compared to +9.4 points a month earlier. This marked the first reading below the zero level since January 2013. US numbers have not looked strong of late, and this has helped the euro hold its ground above the 1.37 level.

This week’s Federal Reserve minutes indicated that interest rates are unlikely to rise, even if unemployment drops to 6.5%. Previously, the Fed had said it would consider raising rates at the 6.5% threshold, but with unemployment falling faster than expected, Fed policymakers agreed that it would “soon be appropriate” to revise the Fed’s forward guidance regarding interest rate levels. The minutes also indicated that the Fed will likely continue trimming QE, barring any downturns in the economy.

In the Eurozone PMIs were mostly weak in January. French Service and Manufacturing PMIs continue to point to contraction, while the Eurozone numbers fell short of their estimates. German numbers were mixed, as Manufacturing PMI was well short of the estimate, while Services PMI managed to beat the forecast. The news was even worse on the inflation front. German PPI declined 0.1%, its third decline in four tries. French CPI declined 0.6%, a multi-year low. Despite the weak data, the euro remains strong as it trades above the 1.37 line.

 

EUR/USD for Friday, February 21, 2014

Forex Rate Graph 21/1/13

EUR/USD February 21 at 10:10 GMT

EUR/USD 1.3715 H: 1.3725 L: 1.3702

 

EUR/USD Technical

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

 

  • EUR/USD is showing little movement in Friday trade.
  • 1.3649 continues in a support role. The next support line is at 1.3585.
  • 1.3786 is the next line of resistance. This is followed by 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 is almost unchanged on Friday. This is consistent with the pair’s current movement, as the pair shows little activity. Short positions have a strong majority, indicative of trader bias towards the dollar moving higher against the euro.

The euro continues to trade above the 1.37 line. EUR/USD is steady in the European session.

 

EUR/USD Fundamentals

  • 15:00 US Existing Home Sales. Estimate 4.73M.
  • 18:45 FOMC Member Richard Fisher Speaks.

*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.