EUR/USD – Stable as German Business Climate Slips

After taking a tumble and losing about 150 points last week, EUR/USD is trading at the 1.32 line in Monday’s European session. On the release front, German Ifo Business Climate softened in July, with a reading of 106.3 points, its worst showing in a year. In the US, today’s only release is New Home Sales. The markets are expecting the key indicator to improve in the July release.

In Germany, Ifo Business Climate did not look sharp as the indicator dropped to 106.3 points, its lowest reading since June 2013. German PMIs weakened in July, as the largest economy in the Eurozone continues shows signs of trouble. The Euro is sensitive to key German data, and the currency will have difficulty holding its own against the dollar if German numbers fail to beat expectations.

Financial leaders and central bankers met at Jackson Hole for a conference, and the markets were all ears as Fed chair Janet Yellen delivered the keynote address on Friday. Any hopes for some dramatic news were dashed, as Yellen did not provide any clues as to the timing of a rate hike. She reiterated that the US job market still needed to improve, so employment numbers remain a crucial factor in any rate move by the Fed. There is a divergence in monetary stance between the ECB and the Fed, as the Fed  is winding up QE, while the ECB may be forced to provide stimulus to the sagging Eurozone economy.

On Thursday, 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 lower growth in the Eurozone.

 

EUR/USD for Monday, August 25, 2014

EUR/USD August 25 at 10:10 GMT

EUR/USD 1.3201 H: 1.3208 L: 1.3184

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2984 1.3104 1.3175 1.3295 1.3346 1.3487

 

  • EUR/USD posted sharp losses late in the Asian session, as the pair dipped below the 1.32 line. EUR/USD has since showed little movement.
  • 1.3175 has weakened as the euro trades at lower levels. This line could break during the day. The next support level is 1.3104.
  • On the upside, 1.3295 has some breathing room.
  • 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 pointing to gains in long positions in Monday trade, reversing the direction seen on Friday. This is not consistent with the movement of the pair, as the euro is almost unchanged. The ratio has a majority of long positions, indicative of trader bias towards the euro heading to higher ground.

 

EUR/USD Fundamentals

  • 8:00 German Ifo Business Climate. Estimate 107.1 points. Actual 106.3 points.
  • 13:00 Belgian NBB Business Climate. Estimate -8.3 points.
  • 13:45 US Flash Services PMI. Estimate 59.2 points.
  • 14:00 US New Home Sales. Estimate 426K.

*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.