EUR/USD – Little Movement as German Business Climate Slips

EUR/USD looked listless for most of last week and this trend has continued, as the pair trades quietly in the mid-1.26 range. German Ifo Business Climate continues to lose ground and dropped to 103.2 points. On Sunday, the ECB released the results of its stress tests of European banks and the results were considered positive overall. In the US, today’s highlight is Pending Home Sales. The markets are expecting a strong improvement, with an estimate of 1.1%.

German Ifo Business Climate continues to weaken, as the indicator dipped to 103.2 points in September. This was short of the estimate of 104.6 points and marks the sixth straight release that the indicator has lost ground. German GDP contracted in Q2, and another contraction in Q3 would indicate a recession in the Eurozone’s largest economy. German growth has been hurt as exports have been hit by EU sanctions against Russia, weak Eurozone demand and slower growth in China, Germany’s third largest trading partner.

On Sunday, the ECB released the results of its stress tests of European banks. The exercise marked a comprehensive and rigorous review of the health of 130 European banks. No German or French banks failed the test, but the third largest Italian lender, Banca Monte Paschi, posted a capital shortfall and will have to explain to the ECB how its plans to eliminate the shortfall. The ECB is trying to restore confidence in the European banking sector and encourage more borrowing and spending on the part of consumers and businesses.

In the US, last week’s jobless numbers were softer than expected. Unemployment Claims rose to 284 thousand, much higher than the previous reading of 264 thousand, and above the estimate of 269 thousand. However, the markets were not overly concerned, as the four-week average, which is less volatile than the weekly release, dipped to 281,000, a 14-year low. Meanwhile, weak inflation levels continue to point to slack in the economy. On Wednesday, this trend continued with soft consumer inflation numbers. CPI and Core CPI both posted small gains of 0.1%.

EUR/USD for Monday, October 27, 2014

EUR/USD October 27 at 11:45 GMT

EUR/USD 1.2681 H: 1.2714 L: 1.2666

EUR/USD Technical

• EUR/USD posted gains in the Asian session but then surrendered these gains. The pair is steady in the European session.
• 1.2688 remains the top of the current range. It is under strong pressure and could break during the day. 1.2806 is stronger.
• 1.2815 continues to provide strong support.
• Current range: 1.2518 to 1.2688

Further levels in both directions:

• Below: 1.2518, 1.2407, 1.2286 and 1.2143
• Above: 1.2688, 1.2806, 1.2905, 1.2984 and 1.3104

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Monday. This is not consistent with the limited movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the euro breaking out of range and moving higher.

EUR/USD Fundamentals

• 9:00 GfK German Ifo Business Climate. Estimate 104.6 points. Actual 103.2 points.
• 9:00 Eurozone M3 Money Supply. Estimate 2.2%. Actual 2.5%.
• 9:00 Eurozone Private Loans. Estimate -1.3%. Actual -1.2%.
• 13:45 US Flash Services PMI. Estimate 57.9 points.
• 14:00 US Pending Home Sales. Estimate 1.1%.

*All release times are GMT

*Key releases are highlighted in bold.

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.