EUR/USD – Dollar Under Pressure As Euro Takes Aim at 1.39

The euro has started off the new trading week with gains, as EUR/USD continues to trade at high levels, In Monday’s European session, the pair is trading in the mid-1.38 range. US releases ended the week on a high note, as UoM Consumer Sentiment jumped to a nine-month high. On the release front, Monday has a light schedule. German Import Prices posted another decline, as deflation concerns gather steam. In the US, today’s sole release is Pending Home Sales. The markets are expecting a strong gain for the March release.

US consumers appear to be happy, as the UoM Consumer Sentiment jumped to 84.1 points, beating the estimate of 83.2. It marked the indicator’s highest level since June. If this optimism continues and translates into increased consumer spending, this should bode well for the US economy.

Meanwhile, the US housing sector continues to sputter. New Home Sales was a disaster, as the key indicator plunged to 384 thousand in March, down from 440 thousand in the previous release. The weak reading was nowhere near the estimate of 455 thousand, and marked an eight-month low for the key housing indicator. Earlier in the week, Existing Home Sales showed a slight drop in March, although the indicator did manage to beat the forecast. The markets are expecting better news from Pending Home Sales on Monday, with an estimate of 1.0%.

The ECB has been under increasing pressure to take action as inflation remains in the doldrums in the Eurozone and the euro continues to trade at high levels. On Thursday, Draghi took note of the high euro exchange rate, calling it an “increasingly important factor” in monetary policy. He hinted that the central bank’s monetary policy stance could change if the euro continues to gain in value. When the euro appeared headed to the 1.40 level several weeks ago, Draghi was able to “talk down” the currency. Will this play work a second time? Draghi also stated that an asset purchase program could be introduced if the inflation outlook worsens.

There was good news out of Germany on Thursday, as Ifo Business Climate continues to cruise at high levels. The key indicator improved to 111.2 points, beating the estimate of 110.5. The indicator has been above the 110 level throughout 2014, indicating strong optimism in the business sector with regard to the German economy. German data can have a strong impact on EUR/USD, as Germany is the Eurozone’s largest economy.

EUR/USD for Monday, April 28, 2014

EUR/USD April 28 at 9:40 GMT

EUR/USD 1.3873 H: 1.3879 L: 1.3815

EUR/USD Technical

• EUR/USD has posted gains in Monday trade.
• 1.3786 is providing strong support.
• 1.3893 has weakened in resistance as the euro trades at higher levels. This is followed by the key level of 1.40, which has not been breached since October 2011.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to short positions in Monday trading, continuing the trend we saw on Friday. This is not consistent with the movement we are seeing from the pair, as the euro has posted gains. The ratio is made up of short positions, indicative of the dollar reversing its downward trend and moving higher.

EUR/USD is on the move, and within striking distance of the 1.39 line. The dollar remains under strong pressure in the European session.

EUR/USD Fundamentals

• 6:00 German Import Prices. Estimate -0.1%. Actual -0.6%.
• Tentative – German Deutsche Bundesbank Monthly Report.
• 14:00 US Pending Home Sales. Estimate 1.0%.

*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.