EUR/USD – Shaky Euro Trading Close to 14-Month Lows

EUR/USD is stable on Monday, as the pair trades in the mid-1.28 range in the European session. The euro had a bad week and lost about 130 points, as the currency finds itself close to 14-month lows against the surging US dollar. In the Eurozone, there are no data releases on Monday. The markets will be listening closely as ECB head Mario Draghi testifies before the European Parliament Economic and Monetary Committee in Brussels. In the US, today’s only data release is Existing Home Sales.

Eurozone inflation numbers continue to float at anemic levels. On Friday, German PPI posted a decline of -0.1%, unchanged from the previous reading. The index has not managed a gain in 2014. Meanwhile, in an effort to combat deflation in the Eurozone, the ECB announced the results of its first TLTRO on Thursday. This lending program aims to bolster the economy by increasing bank lending to the real economy. The ECB said that the take-up by European banks amounted to 82.3 billion euros, which was well short of estimates that ranged from 100-300 billion. Still, it’s too early to declare the program a failure, and traders and investors will have to wait till the next TLTRO in December before reaching conclusions as to the scheme’s success.

The US economy may be much more robust than that of the Eurozone, but it is also affected by weak inflation levels. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation continues to be a concern and could delay an interest rate hike in 2015.

Last week, the dollar posted sharp against the euro after the Federal Reserve policy statement. The Fed reaffirmed that interest rates would remain ultra-low for a “considerable time” after its asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.

EUR/USD for Monday, September 22, 2014

EUR/USD September 22 at 10:10 GMT

EUR/USD 1.2853 H: 1.2868 L: 1.2839

EUR/USD Technical

• EUR/USD posted gains in the Asian session and moved towards resistance at 1.2905. The pair has edged lower in European trading.
• 1.2806 is an immediate support level. It has remained firm since July 2013.
• 1.2905 is the next resistance line. 1.2984 is stronger.
• Current range: 1.2806 to 1.2905

Further levels in both directions:

• Below: 1.2806, 1.2688 and 1.2518 and 1.2353
• Above: 1.2905, 1.2984, 1.3104, 1.3175 and 1.3288

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Monday. This is consistent with the movement of the pair, as the euro has posted small gains. The ratio has a majority of long positions, indicative of trader bias towards the euro moving upwards.

EUR/USD Fundamentals

• 10:00 German Buba Monthly Report.
• 13:00 ECB President Mario Draghi Speaks. Draghi will testify before the European Parliament Economic and Monetary Committee in Brussels.
• 14:00 Eurozone Consumer Confidence. Estimate -11 points.
• 14:00 US Existing Home Sales. Estimate 5.21M.
• 14:05 US FOMC Member William Dudley Speaks.
• 23:30 US FOMC Member Narayana Kocherlakota Speaks.

*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.