EUR/USD – Under Pressure As French, German Numbers Slip

EUR/USD has edged lower on Wednesday, as the pair trades in the low 1.36-range in the European session. On the release front, French Consumer Spending and German Unemployment Change both weakened in April and fell short of expectations. On Tuesday, US CB Consumer Confidence posted another strong reading and beat the estimate. There are no US releases on Wednesday.

The US consumer continues to be optimistic, which is good news for the US recovery. On Tuesday, CB Consumer Confidence continued to look strong as the key indicator improved to 83.0 points in April, which was within  expectations. This was the third straight reading above the 80-point level. US Manufacturing data was mixed, as Core Durable Goods Orders posted a paltry gain of 0.1%, while Durable Goods Orders easily beat the estimate with a 0.8% gain. The markets are keeping a close eye on Thursday’s events, with the release of Preliminary GDP and the all-important Unemployment Claims.

Despite clear signals to the contrary, ECB head Mario Draghi has made a habit of shrugging off concerns about deflation in the Eurozone for months. That finally changed on Monday, when Draghi acknowledged that deflation was a serious issue and that the ECB stood ready to take action. This was another sign that the ECB seems serious about taking monetary action at its policy meeting next month. The monetary tools available to the ECB include a reduction in interest rates, asset purchases, or liquidity injections. Any one of these moves would likely have a strong impact on EUR/USD, which has lost ground since testing the 1.40 level earlier in May.

The week did not start well for the EU, as anti-EU parties posted stunning victories in European parliamentary elections held on Sunday. These “eurosceptic” parties posted strong gains across the continent, notably in France, the UK and Greece. With Eurozone countries suffering from weak growth and high unemployment, voters had a chance to lash back in the elections, and their frustration and anger was heard loud and clear at the ballot box. French Prime Minister Manuel Valls called the results an “earthquake” and the elections could weigh on the euro, although so far the currency has remained firm.

 

EUR/USD for Wednesday, May 28, 2014

 

 

EUR/USD May 28 at 10:10 GMT

EUR/USD 1.3621 H: 1.3638 L: 1.3617

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3346 1.3487 1.3585 1.3649 1.3786 1.3893

 

  • The euro has edged lower in Wednesday trade.
  • 1.3585 continues to provide support. There is stronger support at 1.3487.
  • 1.3649 is a weak resistance line. 1.3786 is stronger.

Further levels in both directions:

  • Below: 1.3585, 1.3487, 1.3346 and 1.3219
  • Above: 1.3649, 1.3786, 1.3893, 1.4000 and 1.4149

 

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged in Wednesday trading. This is not consistent with the movement we are seeing from the pair, as the euro has edged lower. The ratio has a majority of long positions, indicative of a trader bias towards the euro posting gains.

EUR/USD is trading slightly above the 1.36 line. The pair is unchanged in the European session.

 

EUR/USD Fundamentals

  • 6:00 German Import Prices. Estimate +0.3%. Actual -0.3%.
  • 6:45 French Consumer Spending. Estimate +0.5%. Actual -0.3%.
  • 7:55 German Unemployment Change. Estimate -14K. Actual 24K.
  • 8:00 Eurozone M3 Money Supply. Estimate 1.2%. Actual 0.8%.
  • 8:00 Eurozone Private Loans. Estimate -2.1%. Actual -1.8%.
  • 8:38 Spanish HPI. Estimate -0.5%.
  • Tentative – German 30-year Bond Auction.

*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.