EUR/USD – Weak GDP Numbers Push Euro Lower

The euro has resumed its downward trend on Thursday. In the European session, the pair is trading in the mid-1.36 range, its lowest level since late February. The slumping euro has surrendered over 350 points since coming close to the 1.40 line late last week. On the release front, German Preliminary GDP looked sharp, posting its highest gain in a year. However, Eurozone Flash GDP dipped in Q1. On the inflation front, Eurozone Core CPI improved in April and matched the forecast. In the US, it’s a packed schedule, with three major events – Core CPI, Unemployment Claims and the Philly Fed Manufacturing Index. As well, Federal Reserve chair Janet Yellen will speak at an event in Washington.

At last week’s policy meeting, Mario Draghi, the ECB said it would be comfortable taking monetary action in June, the markets jumped, and the euro has been in a tailspin ever since. However, Draghi gave himself plenty of wiggle room, saying the ECB would take into account growth and inflation forecasts before making any moves. Eurozone Core CPI improved to 1.0% in April, up from 0.7% a month earlier. Eurozone CPI followed suit, as it improved to 0.7%, up from 05%. With both inflation indicators matching their estimates and pointing upwards, the ECB has some breathing room before having to take action. If upcoming inflation numbers meet expectations, we could see the ECB play it safe in June and remain on the sidelines yet again.

Eurozone GDP releases, the primary gauge of economic growth, were a mix on Thursday. German Preliminary GDP jumped 0.8% in Q1, its best showing since Q1 in 2013. This edged above the estimate of 0.7%. However, Eurozone Flash GDP failed to keep pace. The indicator dipped to 0.2%, short of the estimate of 0.3%. French and Italian GDP releases also disappointed, as both weakened in April and missed expectations.

Low inflation levels have also been a persistent problem in the US, and Fed chair Yellen highlighted this issue when speaking before Congress last week. Inflation levels are nowhere near the Fed’s target of 2.0%, and weak inflation is a sign of an underperforming US economy. There was good news on Wednesday as PPI, a key inflation indicator, edged higher in April, coming in at 0.6%. This easily beat the estimate of 0.2%. Core PPI also beat the estimate, posting a gain of 0.5%.

 

EUR/USD for Thursday, May 15, 2014

Forex Rate Graph 21/1/13

EUR/USD May 15 at 9:00 GMT

EUR/USD 1.3673 H: 1.3723 L: 1.3660

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3487 1.3585 1.3649 1.3786 1.3893 1.400

 

  • EUR/USD has posted losses in Thursday trade. The pair dropped below the 1.37 line early in the European session.
  • On the downside, 1.3649 has weakened as the euro has lost ground. Will the pair break below this line? 1.3585 is stronger.
  • 1.3786 is a strong resistance line.

Further levels in both directions:

  • Below: 1.3649, 1.3585, 1.3487 and 1.3346
  • Above: 1.3786, 1.3893, 1.4000, 1.4149

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Thursday, reversing the direction seen a day earlier. This is not consistent with the pair’s current movement, as the euro has resumed its downward move. The ratio runs slightly in favor of long positions, indicative of a slight trader bias towards the euro reversing its downward spiral.

EUR/USD continues to lose ground and has dropped below the 1.37 level. The euro is under pressure in the European session.

 

EUR/USD Fundamentals

  • 5:30 French Preliminary GDP. Estimate 0.4%. Actual 0.0%.
  • 6:00 German Preliminary GDP. Estimate 0.7%. Actual 0.8%.
  • 8:00 ECB Monthly Bulletin.
  • 8:00 Italian Preliminary GDP. Estimate 0.2%. Actual -0.1%.
  • 9:00 Eurozone CPI. Estimate 0.7%.
  • 9:00 Eurozone Core CPI. Estimate 1.0%.
  • 9:00 Eurozone Flash GDP. Estimate 0.4%.
  • 12:30 US Core CPI. Estimate 0.1%.
  • 12:30 US Unemployment Claims. Estimate 321K.
  • 12:30 US CPI. Estimate 0.3%.
  • 12:30 US Empire State Manufacturing Index. Estimate 5.5 points.
  • 13:00 US TIC Long-Term Purchases. Estimate 32.3B.
  • 13:15 US Capacity Utilization Rate. Estimate 79.2%.
  • 13:15 US Industrial Production. Estimate 0.4%.
  • 14:00 US Philly Fed Manufacturing Index. Estimate 13.9 points.
  • 14:00 US Mortgage Delinquencies.
  • 14:00 US NAHB Housing Market Index. Estimate 49 points.
  • 14:30 US Natural Gas Storage. Estimate 99B.
  • 23:00 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.