EUR/USD – Euro Gains Continue As 1.39 in Sight

European markets are closed for the May 1 holiday on Thursday, but that hasn’t stopped the euro, which continues to post gains against the retreating US dollar. In the European session, EUR/USD is trading slightly below the 1.39 line, its highest level in a month. There are no European events on schedule due to the holiday. Over in the US, it’s a busy day, highlighted by two key releases – ISM Manufacturing PMI and Unemployment Claims. As well, Federal Reserve Chair Janet Yellen will address a banking conference in Washington. On Wednesday, the Fed implemented another taper of QE and stated that it expected interest rates to remain at low levels.

As expected, the Federal Reserve trimmed its QE program by $10 billion on Wednesday. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.

ADP Nonfarm Payrolls were released on Wednesday, ahead of the critical official NFPs later in the week. The news was positive, as the indicator jumped to 220 thousand, marking a four-month low. This easily beat the estimate of 203 thousand. However, Advance GDP couldn’t keep pace, as the key indicator’s upward swing came to a crashing halt, with a Q1 gain of just 0.1%, compared to a 3.2% reading in Q4. This was well off the estimate of 1.2%. Is the US economy stalling? The weak reading could be a result of a harsh winter, but this will be of little consolation to the markets, and the dollar has responded with losses against its major rivals.

German numbers were a mix on Wednesday. Retail Sales, the primary gauge of consumer spending, weakened in March, coming in at -0.7%, marking a three-month low. This was slightly lower than the estimate of -0.6%. On the bright side, Unemployment Change dropped by 25 thousand, much better than the estimate of -12 thousand. Meanwhile, Eurozone CPI Flash Estimate posted a gain of 0.7%, just short of the estimate of 0.8%.

EUR/USD for Thursday, May 1, 2014

EUR/USD May 1 at 8:50 GMT

EUR/USD 1.3885 H: 1.3889 L: 1.3865

EUR/USD Technical

• EUR/USD has posted slight gains in Thursday trade.
• 1.3786 has strengthened as a support line following recent gains by the euro.
• On the upside, 1.3893 is under strong pressure. Will the pair break through? 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 gains in short positions in Thursday trading, reversing the direction seen a day earlier. This is not consistent with the movement we are seeing from the pair, as the euro continues to reach higher levels. The ratio is made up of a majority of short positions, indicative of the dollar reversing directions and moving upwards.

EUR/USD is taking aim at 1.39, as the euro continues to post gains. The pair is unchanged in the European session.

EUR/USD Fundamentals

• 11:30 US Challenger Job Cuts.
• 12:30 US Fed Chair Janet Yellen Speaks.
• 12:30 US Unemployment Claims. Estimate 317K.
• 12:30 US Core PCE Price Index. Estimate 0.1%.
• 12:30 US Personal Spending. Estimate 0.7%.
• 12:30 US Personal Income. Estimate 0.4%.
• 13:45 US Final Manufacturing PMI. Estimate 55.8 points.
• 14:00 US ISM Manufacturing PMI. Estimate 54.3 points.
• 14:00 US Construction Spending. Estimate 0.5%.
• 14:00 US ISM Manufacturing Prices. Estimate 59.4 points.
• 14:30 US Natural Gas Storage. Estimate 75B.
• All Day – US Total Vehicle Sales. Estimate 16.2M.

*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.