EUR/USD – Stable as ECB Statement Eyed

EUR/USD is steady on Thursday, as the pair continues to trade close to nine-month lows. In the European session, the pair is trading in the mid-1.33 range. Today’s highlight is the ECB rate statement, with the ECB expected to maintain rates at their current level of 0.15%. Elsewhere, German Industrial Production posted a small gain of 0.3%, well below expectations. In the US, the day’s major event is Unemployment Claims. Little change is expected in this release.

The ECB will be in the spotlight later on Thursday, but the markets are not expecting any dramatic announcements. In June, the ECB cut rates to a record low of 0.15% in order to boost growth and stave off deflation. However, inflation levels have not risen, and continuing tension with Russia over Ukraine has had a negative impact on growth. German numbers have softened and Italy is officially in recession, having posted a decline in GDP for two consecutive quarters. This leaves ECB President Mario Draghi in a difficult position, with few tools in his arsenal to boost the struggling Eurozone economy.

German numbers continue to point to trouble in the Eurozone’s largest economy. Industrial Production posted a gain of 0.3%, but this was nowhere close to the forecast of 1.4%. On Tuesday, Factory Production declined by 3.2%, the steepest drop since October 2012. The Bundesbank is blaming tensions with Russia and stronger EU sanctions against Moscow for the weak economic numbers, as Germany is Russia’s number one trading partner in Europe. With key indicators pointing downward and confidence in the German economy ebbing, we could see a decline in GDP in the second quarter, which could have a chilling effect on the shaky euro.

US PMIs posted strong gains in July. On Tuesday, ISM Non-manufacturing PMI looked sharp, rising to 58.7 points last month. This easily beat the estimate of 56.6, and was the index’s best showing since February 2011. This follows an excellent Manufacturing PMI reading last week, with the index climbing to 57.1 points, a three-year high. There was more positive news on Tuesday, as Factory Orders had an impressive July, gaining 1.1%. These solid numbers point to healthy expansion in the US manufacturing and services sectors, which has helped the dollar gain ground at the euro’s expense.

 

EUR/USD for Thursday, August 7, 2014

EUR/USD August 7 at 9:55 GMT

EUR/USD 1.3377 H: 1.3392 L: 1.3365

 

EUR/USD Technical

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

 

  • EUR/USD was flat in the Asian session. The pair has weakened in the European session, dropping below the 1.34 line.
  • 1.3346 has reverted to a support level. This is a weak line and was briefly breached earlier in the day. 1.3295 is stronger.
  • 1.3487 is providing strong resistance.
  • 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 1.37

 

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions in Thursday trade, reversing the direction seen a day earlier. This is not consistent with the lack of movement we’re seeing from the euro. The ratio has a majority of long positions, indicative of trader bias towards the euro breaking out and moving higher.

 

EUR/USD Fundamentals

  • 6:00 German Industrial Production. Estimate 1.4%. Actual 0.3%.
  • 6:45 French Trade Balance. Estimate -5.0B. Actual -5.4B.
  • 8:40 Spanish 10-year Bond Auction. Estimate 2.69%.
  • 11:45 ECB Minimum Bid Rate. Estimate 0.15%.
  • 12:30 ECB Press Conference.
  • 12:30 US Unemployment Claims. Estimate 305K.
  • 14:30 US Natural Gas Storage. Estimate 89B.
  • 19:00 US Consumer Credit. Estimate 18.3B.

*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.