EUR/USD – Stable But Euro PMIs Raise Concerns

The euro is steady on Thursday, as EUR/USD trades in the mid-1.32 range in the European session. The pair has slipped over a cent this week, and finds itself at its lowest levels since September 2013. In economic news, a host of Euro PMIs painted a mixed picture. It’s a busy day as well in the US, led by two key events – Unemployment Claims and the Philly Fed Manufacturing Index.

The Eurozone released Services and Manufacturing PMIs, and the results were mixed. French Manufacturing PMI came in at 46.5 points, the fourth straight reading below 50, which separates between contraction and expansion. French Flash Services PMI came in at 51.1, above the estimate. In Germany, the Service and Manufacturing PMIs both softened in July but beat the estimates. Eurozone Manufacturing and Services PMIs also weakened in July. There is cause for concern as most of the PMI readings were weaker compared to a month earlier, pointing to weaker growth in the Eurozone.

The Federal Reserve released its policy meeting minutes on Wednesday. The minutes were hawkish in tone, with the Fed saying that an interest rate hike could come sooner rather than later if employment numbers continue to improve. The Fed said that the economy continues to improve, but the QE program, which is scheduled to wind up in October, will not be accelerated. Once the asset purchase scheme is terminated, the guessing game regarding the timing of a rate hike will only intensify.

Financial leaders and central bankers from around the world will gather in Jackson Hole, Wyoming for a conference which starts on Thursday. This will be Janet Yellen’s first appearance as Fed chair at the conference. There is speculation that Jackson Hole could be a currency event, which would be a marked departure from the conference’s usual focus on the US labor market and monetary policy. If this is the case, we could see a sharp reaction from the currency markets. The markets will be listening closely to Yellen’s remarks at the conference.

The US economy has been moving in the right direction, but inflation numbers in the US remain at very low levels. Earlier in the week, CPI and Core CPI, the primary gauges of consumer inflation, both posted paltry gains of 0.1%. These weak readings come on the heels of PPI, a manufacturing inflation index, which also came in at 0.1% last month. 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 housing numbers were sharp. Building Permits improved to 1.05 million, beating the estimate of 1.00 million. Housing Starts jumped to 1.09 million, easily beating the estimate of 0.97 million.

EUR/USD for Thursday, August 21, 2014

EUR/USD August 21 at 9:40 GMT

EUR/USD 1.3268 H: 1.3278 L: 1.3242

EUR/USD Technical

• EUR/USD edged lower in the Asian session but then reversed directions and continues to move upwards in European trade.
• 1.3175 is providing strong support.
• 1.3295 remains a weak resistance line. 1.3346 is next.
• Current range: 1.3175 to 1.3295

Further levels in both directions:

• Below: 1.3175, 1.3104, 1.2984 and 1.2904
• Above: 1.3295, 1.3346, 1.3487 and 1.3585

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Thursday trade. This is consistent with the movement of the pair, which has been limited during the day. The ratio has a majority of long positions, indicative of trader bias towards the euro heading to higher ground.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Estimate 47.9 points. Actual 46.5 points.
• 7:00 French Flash Services PMI. Estimate 50.3 points. Actual 51.1 points.
• 7:30 German Flash Manufacturing PMI. Estimate 51.7 points. Actual 52.0 points.
• 7:30 German Flash Services PMI. Estimate 55.5 points. Actual 56.4 points.
• 8:00 Eurozone Flash Manufacturing PMI. Estimate 51.4 points. Actual 50.8 points.
• 8:00 Eurozone Flash Services PMI. Estimate 53.6 points. Actual 53.5 points.
• 12:30 US Unemployment Claims. Estimate 302K.
• 13:45 US Flash Manufacturing PMI. Estimate 55.7 points.
• 14:00 Eurozone Consumer Confidence. Estimate -9 points.
• 14:00 Philly Fed Manufacturing Index. Estimate 19.7 points.
• 14:00 US Existing Home Sales. Estimate 5.01M.
• 14:00 US CB Leading Index. Estimate 0.6%.
• 14:30 US Natural Gas Storage. Estimate 83B.
• Day 1 – Jackson Hole Symposium.

*Key releases are highlighted in bold

*All release times are GMT

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