EUR/USD – Euro Shrugs Off Weak Eurozone CPI

EUR/USD has edged higher in Monday trading, as the pair trades in the high-1.37 range in the European session. In economic news, Eurozone CPI lost ground in February, while German Retail Sales posted a strong gain. In the US, today’s sole data release is Chicago PMI. As well, Federal Reserve chair Janet Yellen will speak at an event in Chicago.

Eurozone inflation numbers remain at low levels. On Friday, German Preliminary CPI dropped to 0.3%, missing the estimate of 0.4%. On Monday, Eurozone CPI followed suit, dropping to 0.5%, down from 0.8% a month earlier. These weak numbers point to a Eurozone economy that is underperforming, and the ECB will be under pressure to take steps to boost inflation.

US Unemployment Claims continued to impress last week. 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.

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. Last week, 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 Monday, March 31, 2014

Forex Rate Graph 21/1/13

EUR/USD March 31 at 11:25 GMT

EUR/USD 1.3785 H: 1.3793 L: 1.3724

 

EUR/USD Technical

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

 

  • EUR/USD was quiet in the Asian session, but has edged higher in European trading.
  • 1.3649 is providing strong support.
  • The pair is testing resistance at 1.3786, and we could see this line fall during the day. There is stronger resistance at 1.3893.
  • 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 short positions on Monday. This is not consistent with the pair’s current movement, as the euro has posted gains to start the week. Short positions retain a strong majority, indicative of trader bias towards the dollar posting gains at the expense of the euro.

The euro has gained ground in European session and is within striking distance of the 1.38 level.

 

EUR/USD Fundamentals

  • 6:00 German Retail Sales. Estimate -0.3%. Actual +1.3%.
  • 9:00 Eurozone CPI Flash Estimate. Estimate 0.6%. Actual 0.5%.
  • 9:00 Italian Preliminary CPI. Estimate 0.2%. Actual 0.1%.
  • 13:45 US Chicago PMI. Estimate 59.2 points.
  • 13:55 US Federal Reserve Chair Janet Yellen 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.