EUR/USD – Euro Slide Continues After Solid US Employment, GDP Numbers

EUR/USD continues to lose ground on Friday, as the pair is struggling to stay above the 1.37 line in the European session. The euro has lost over one cent since Tuesday and remains under pressure. In economic news, US Unemployment Claims continued to post strong releases, and Final GDP met expectations. However, Pending Home Sales disappointed, with its second decline in three releases. On Friday, French Consumer Spending posted its first gain in three months. Over in the US, today’s highlight is Revised UoM Consumer Sentiment.

US Unemployment Claims continues to impress. The key indicator dropped to 311 thousand, its lowest level in over three months. The estimate was 326 thousand, marking the fourth straight week that the reading has come in below the forecast. The news was not as good from Pending Home Sales, with a reading of -0.8%. This disappointed the markets, which had expected a small gain of 0.1%. Earlier in the week, New Home Sales also lost ground in February, and concern is bound to increase about the health of the US housing industry. Final GDP posted a gain of 2.6% in Q4, just shy of the estimate of 2.7%. This was lower than the Q3 gain, but is indicative of a growing economy.

German Consumer Climate remains at high levels, posting a second straight reading of 8.5 points, which matched the forecast. The indicator has steadily risen, and the last time we saw a stronger reading was back in 2007, before the global economic crisis. German Business Climate also looked sharp in February. Increasing consumer confidence usually translates into more consumer spending, which is a critical component of economic growth.

With the Eurozone struggling with weak inflation and the euro continuing to trade at high levels, the ECB is openly considering QE and negative rates. German Bundesbank head Jens Weidmann gave support to a negative deposit rate in order to respond to the strong euro. He also raised the possibility of a QE scheme for the ECB, whereby the central bank would purchase loans or other assets in order to fight deflation, which remains a serious concern. Mario Draghi also spoke on the issue, saying that the ECB is ready to act if inflation slips further.

Ukraine’s economy is in shambles as a result of the four-month political crisis which led to the ouster of the government and the Russian annexation of the Crimean region. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by as much as 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.

EUR/USD for Friday, March 28, 2014

EUR/USD March 28 at 9:00 GMT

EUR/USD 1.3718 H: 1.3752 L: 1.3706

EUR/USD Technical

• EUR/USD continues to lose ground on Friday, continuing the trend we’ve seen for most of the week. The pair is flirting with the 1.37 line.
• 1.3649 is providing support. This is followed by a support level at 1.3585.
• 1.3786 continues to provide resistance. This line has some breathing room as the euro continues to move lower.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3786, 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio has posted gains in long positions on Friday, continuing the direction we’ve seen for most of this week. This is not consistent with the pair’s current movement, as the euro continues to post losses. Short positions retain a strong majority, indicative of trader bias towards the dollar continuing to move higher at the expense of the euro.

The euro continues drop on Friday. The dollar remains under strong pressure in the European session and could dip below the 1.37 line during the day.

EUR/USD Fundamentals

• 00:20 US FOMC Member Daniel Tarullo Speaks.
• 7:00 German Import Prices. Estimate +0.3%. Actual -0.1%.
• All Day – German Preliminary CPI. Estimate 0.4%.
• 7:45 French Consumer Spending. Estimate 1.0%. Actual 0.1%.
• Tentative – Italian 10-year Bond Auction.
• 12:30 US Core PCE Price Index. Estimate 0.1%.
• 12:30 US Personal Spending. Estimate 0.3%.
• 12:30 US Personal Income. Estimate 0.4%.
• 13:55 US Revised UoM Consumer Sentiment. Estimate 80.6 points.
• 13:55 US Revised UoM Inflation Expectations.

*Key releases are highlighted in bold

*All release times are GMT

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