EUR/USD: Sagging Euro Drops to 8-Month Low

EUR/USD is under pressure on Wednesday, as the pair trades in the mid-1.34 range in the European session. The euro has slipped to its lowest level since November, and has slipped over 200 points in July. The violence in Gaza and Ukraine, weak Eurozone data and talk of a rate hike in the US have helped to bolster the US dollar at the expense of the euro. Will the downward trend continue? On the release front, it’s another quiet day, with just two releases on the schedule. Eurozone Consumer Confidence has been weak, and little change is expected in the June release. In the US, the sole is event is Crude Oil Inventories.

US numbers were a mix on Tuesday. Inflation numbers continue to struggle, as Core CPI posted a paltry gain of 0.1%, shy of the estimate of 0.2%. The key index has looked anemic in 2014, with its highest gain this year at just 0.3%. CPI was bit stronger, as it gained 0.3% last month, matching the forecast. Meanwhile, Existing Home Sales jumped to 5.04 million, surpassing the estimate of 4.94 million. This was the best showing we’ve seen since October, and follows a disappointing release from Housing Starts, which was published last week.

Geopolitical tensions are bad news for the markets, which crave stability. With violence continuing in Ukraine and Gaza, nervous investors have rallied around the safe-haven US dollar at the expense of other currencies, including the euro. In Ukraine, the downing of a Malaysian Airlines jet, apparently by pro-Russian separatists, has seriously frayed relations between the West and Russia, which have already been strained since the latter annexed Crimea. Fighting continues between the separatists and Ukrainian forces in Eastern Ukraine. The Europeans are threatening stronger sanctions against Russia, and escalating tensions within Europe does not bode well for the euro. In the Middle East, the fighting in Gaza between Hamas and Israel has intensified, as Israel presses on with a land offensive and casualties rise on both sides. Meanwhile, the international community is intensifying efforts to broker a cease-fire, but in the meantime the fighting continues.

Try as it might, the ECB can’t seem to coax much inflation out of the Eurozone economy. Eurozone CPI, the primary gauge of consumer inflation, remained unchanged in June, posting a gain of 0.5%. This is well below the central bank’s target of 2%. Germany, the Eurozone’s largest economy, is also suffering from weak inflation. PPI came in at a flat 0.0%, and the manufacturing inflation index has failed to post a gain in 2014. Faced with weak inflation and growth levels in the Eurozone, the ECB will be under pressure to take some action at its August policy meeting.

 

EUR/USD for Wednesday, July 23, 2014

EUR/USD July 23 at 9:25 GMT

EUR/USD 1.3464 H: 1.3473 L: 1.3455

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3175 1.3295 1.3346 1.3487 1.3585 1.3651

 

  • EUR/USD was stable in the Asian session. The pair has edged higher in European trading.
  • 1.3346 is providing strong support.
  • On the upside, 1.3487 has reverted to a resistance role as the euro has lost ground. 1.3585 is stronger.
  • Current range: 1.3346 to 1.3487

Further levels in both directions:

  • Below: 1.3346, 1.3295, 1.3175 and 1.3104
  • Above: 1.3487, 1.3585, 1.3651 and 1.3786

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Wednesday. This is not consistent with the lack of movement we are currently seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

 

EUR/USD Fundamentals

  • 14:00 Eurozone Consumer Confidence. Estimate -6 points.
  • 14:30 US Crude Oil Inventories. Estimate -2.1M.

*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.