EUR/USD – Little Change to Start Week

The euro is calm on Monday, as the pair trades just below the 1.34 line in the European session. In economic news, Eurozone Trade Balance did not impress, as the trade surplus narrowed to a six-month low. There are no major releases on today’s calendar, so it could be an uneventful day for EUR/USD.

With the US continuing to suffer from low inflation levels, markets expectations have been low for key inflation indicators. On Friday, PPI, the primary gauge of inflation in the manufacturing sector, slipped to 0.1%, down from 0.4% a month earlier. This matched the estimate. Weak inflation is one reason why the Federal Reserve is in no rush to raise interest rates, as low inflation points to slack in the economy. Meanwhile, US Preliminary UoM Consumer Sentiment slipped to 79.2 points, its lowest level since October. This follows weak retail sales numbers earlier in the week. This means that an improvement in the US labor market has not translated into stronger consumer confidence and spending, which are critical for economic growth.

Elsewhere in the US, Unemployment Claims came in higher than expected. The indicator climbed to 311 thousand, marking a six-week high. The estimate stood at 307 thousand. Employment indicators are being closely scrutinized by analysts, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed. Earlier in the week, JOLTS Job Openings hit its highest level in 13 years, although it too missed expectations.

Despite broad interest rate cuts by the ECB in June, the Eurozone continues to limp along, including Germany, the region’s locomotive. Inflation and growth levels remain weak, as underscored by last week’s GBP and inflation releases. French Preliminary GDP remained flat at 0.0%, unchanged from a month earlier. German Preliminary GDP slipped to -0.2%, the first contraction in the German economy since Q4 of 2012. Eurozone Flash GDP also weakened to -0.2%, down from 0.0% in the previous release. All three GDP releases missed their estimates, and the weak numbers could push the euro even lower. On the inflation front, the news is not good, as deflation is a growing concern. Last week, Eurozone Final CPI dipped to 0.4%, down from 0.5% a month earlier. As well, German and French inflation numbers remained weak.

With the Eurozone economy sputtering, it shouldn’t come as a surprise that last week’s confidence indicators pointed sharply downwards. German ZEW Economic Sentiment, a key release, took a tumble in July, falling to just 8.6 points, down from 27.1 points a month earlier. This was its lowest level since November 2012. Weakening confidence in the economy could lead to decreased spending and hiring and weigh on economic growth.

EUR/USD for Monday, August 18, 2014

EUR/USD August 18 at 9:55 GMT

EUR/USD 1.3389 H: 1.3399 L: 1.3381

EUR/USD Technical

• EUR/USD has remained steady in the European and Asian sessions, staying close to the 1.3390 line.
• 1.3346 is an immediate support line. 1.3295 is stronger.
• 1.3487 remains a strong resistance line.
• 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 1.3793

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions in Monday trade. This not consistent with the current lack of movement displayed by the pair. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

• 9:00 Eurozone Trade Balance. Estimate 14.9B. Actual 13.8B.
• 10:00 German Buba Monthly Report.
• 14:00 US NAHB Housing Market Index. Estimate 53 points.

*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.

In the US, JOLTS Job Openings improved to 4.67 million, its third consecutive gain from the previous release. However, this fell short of expectations, as the estimate stood at 4.74 million. In the US, employment indicators are under the market microscope, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed.