EUR/USD – Weak Euro Shrugs Off Strong Eurozone Industrial Production

It’s more of the same from the euro, which has had a quiet week and is showing very little movement on Friday. In the European session, EUR/USD is trading in the low-1.29 range. On the release front, there was yet another weak German inflation reading, as WPI came in at -0.2%. Eurozone Industrial Production posted a strong gain of 1.0%, exceeding expectations. Eurozone finance ministers are meeting today in Milan. Taking a look at Friday’s fundamental events, In the US, it’s a busy day with the release of three major events – Retail Sales, Core Retail Sales and UoM Consumer Sentiment.

US employment data disappointed on Thursday. Unemployment Claims rose to 315 thousand, the largest number of claims in 10 weeks. The reading was much higher than the estimate of 306 thousand. This follows soft numbers from JOLTS Job Openings and a dismal Nonfarm Payrolls last week. The troubling job numbers are unlikely to affect the Fed’s plan to continue trimming QE next week, but a weak labor market could postpone plans to raise interest rates by mid-2015.

In the aftermath of some drastic monetary action by the ECB, Eurozone finance ministers will huddle in Milan on Friday to try and coordinate fiscal policy. ECB President Mario Draghi has urged Eurozone members to do more to increase growth, and there’s no arguing that the sputtering Eurozone economy has taken its toll on the national economies of member states. However, reaching agreement among some 18 countries is never an easy task, so it’s questionable if we’ll see any tangible results from the September meeting.

Will the real Germany please stand up? Recent German numbers have been mixed. GDP and Business Climate looked weak, while recent manufacturing data has been sharp. This week started off on a high note, as the trade surplus climbed to EUR 22.2 billion, up from 16.2 billion a month earlier. This easily beat the estimate of 17.3 billion. The strong figure follows impressive German manufacturing data last week, led by Industrial Production, which gained 1.9% in August, its strongest showing in 2014. Inflation (or the lack of) continues to be a major concern in the Eurozone and German inflation levels have also been weak. Low inflation levels continue to weigh on the shaky euro, which finds itself looking upwards at the 1.30 line.

After months of fighting in eastern Ukraine between government forces and pro-Russian fighters, a week-long ceasefire appears to be holding, although some sporadic fighting has been reported. Russia has denied assisting the rebels, but both Ukraine and NATO have said that Russian forces are in Ukraine and have taken part in the fighting. The crisis has severely strained relations between the West and Russia, and trade between Europe and Russia has suffered as a result. On Thursday, European countries and the US slapped further sections on Russia, which they said would be cancelled if the ceasefire continues to hold.

 

EUR/USD for Friday, September 12, 2014

EUR/USD September 12 at 8:55 GMT

EUR/USD 1.2922 H: 1.2933 L: 1.2914

 

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.2688 1.2806 1.2905 1.2984 1.3104 1.3175

 

  • EUR/USD has shown little activity in the Asian and European sessions. .
  • On the downside, 1.2905 remains under strong pressure and could break during the day. 1.2806 is stronger.
  • 1.2984 is the next resistance line. 1.3104 is next.
  • Current range: 1.2905 to 1.2984

Further levels in both directions:

  • Below: 1.2905, 1.2806, 1.2688 and 1.2518
  • Above: 1.2984, 1.3104, 1.3175 and 1.3288

 

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Friday. This is consistent with the lack of movement which we continue to see from the pair. The ratio has a majority of long positions, indicative of a trader bias towards the euro breaking out of range and moving upwards.

 

EUR/USD Fundamentals

  • 6:00 German WPI. Estimate +0.2%. Actual -0.2%.
  • 8:00 Italian Industrial Production. Estimate -0.1%. Actual -1.0%.
  • 9:00 Eurozone Industrial Production. Estimate 0.6%. Actual 1.0%.
  • 9:00 Eurozone Employment Change. Estimate 0.1%. Actual 0.2%.
  • All Day -Eurogroup Meetings.
  • 12:30 US Core Retail Sales. Estimate 0.2%.
  • 12:30 US Retail Sales. Estimate 0.3%.
  • 12:30 US Import Prices. Estimate -0.8%.
  • 13:55 US Preliminary UoM Consumer Sentiment. Estimate 83.2 points.
  • 13:55 US Preliminary UoM Inflation Expectations.
  • 14:00 US Business Inventories. Estimate 0.5%.

*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.