EUR/USD: Steady Despite Softer German Business Climate

EUR/USD has edged higher on Tuesday, as the pair trades slightly above the 1.36 line in the European session. On the release front, German Ifo Business Climate fell short of the estimate and dipped to a six-month low. It’s a busy day in the US, highlighted by CB Consumer Confidence and the second key housing event this week, New Home Sales.

German Ifo Business Climate lost ground for a second straight month, dipping to 109.7 points, short of the estimate of 110.3 points. It was the indicator’s lowest level in 2014, but the indicator still remains at high levels, close to the 110 mark. This release comes on the heels of Eurozone PMIs, which also softened in May.

Eurozone PMIs are key indicators of growth in the services and manufacturing sectors, and across the board, the May numbers were a disappointment. The German and Eurozone figures remained above the 50-point level, pointing to expansion. However, the French figures remained below the 50 mark, pointing to continuing contraction in the manufacturing and services sectors of the Eurozone’s second largest economy. A worrying trend is that with the exception of Eurozone Services PMI, all of the PMIs posted their weakest reading in 2014.

Unlike his peers at the BOE and Federal Reserve, ECB head Mario Draghi is not being coy about possible interest rate hikes. On the weekend, Draghi stated flat out that he did not foresee the ECB raising rates before 2017. Draghi noted that the ECB had extended access by European banks to unlimited liquidity until that time, and that the Eurozone recovery was still weak. However, traders should not treat Draghi’s remarks as etched in stone, as the ECB will likely have to raise rates if the economy recovers faster than anticipated.

There were no surprises last week from the Federal Reserve, which continued to taper its QE program.  The Fed reduced the scheme by $10 billion, to $35 billion/month. If all goes as planned, the Fed could wind up QE in the fall. The Fed also hinted that interest rates will continue to stay low for the foreseeable future, which likely means that we won’t see any rate hikes before the first quarter of 2015. With regard to economic activity, the Fed noted that the recovery is continuing, but it reduced its forecast of economic growth to 2.1-2.3%, down from an earlier forecast of around 2.9 percent. The bottom line? There were no dramatic items in the Fed statement, with one analyst describing current Fed policy as “steady as she goes”.

 

EUR/USD for Tuesday, June 24, 2014

EUR/USD June 24 at 9:50 GMT

EUR/USD 1.3621 H: 1.3625 L: 1.3593

 

EUR/USD Technical

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

 

  • EUR/USD was steady in the Asian session and has edged higher in European trading.
  • 1.3585 has switched back to a support role. 1.3487 is stronger.
  • 1.3649 is an immediate resistance line. There is stronger resistance at 1.3786.
  • Current range: 1.3585 to 1.3649

Further levels in both directions:

  • Below: 1.3585, 1.3487, 1.3346 and 1.3219
  • Above: 1.3649, 1.3786, 1.3893 and 1.40

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Tuesday. This is not consistent with the pair’s movement, as the euro has posted slight gains . The ratio is at an even split between long and short positions, indicative of a lack of trader bias as to the future movement of EUR/USD.

 

EUR/USD Fundamentals

  • 8:00 German Ifo Business Climate. Estimate 110.3 points. Actual 109.7 points.
  • 12:05 US FOMC Member Charles Plosser Speaks.
  • 13:00 Belgian NBB Business Climate. Estimate -4.1 points.
  • 13:00 US S&P/CS Composite-20 HPI. Estimate 11.7%.
  • 13:00 US HPI. Estimate 0.6%.
  • 14:00 US CB Consumer Confidence. Estimate 83.6 points.
  • 14:00 US New Home Sales. Estimate 442K.
  • 14:00 US Richmond Manufacturing Index. Estimate 6 points.
  • 14:00 US Treasury Secretary Jack Lew 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.