EUR/USD – Fed Statement Bolsters US Dollar

EUR/USD has posted slight losses on Thursday, as the pair trades below the 1.26 in the European session. In the Eurozone, German Unemployment Change was excellent, with a reading of -22 thousand. Later in the day, we’ll get a look at German CPI, which is expected to post a decline of 0.1%. In the US, today’s highlights are US GDP and Unemployment Claims. Both indicators are expected to post strong figures, so we could see the dollar post gains in the North American session. As well, Federal Reserve Chair Janet Yellen will address an event in Washington.

The euro is sensitive to German numbers, as Germany is the locomotive of Europe and the largest economy in the Eurozone. Unemployment Change was unexpectedly strong, with a contraction of 22 thousand in September. The estimate stood at 4 thousand. German inflation numbers have been very soft, and German CPI, a key indicator is expected to post a weak reading of -0.1%.

The US dollar gained about 100 points on Wednesday, boosted by a hawkish Fed policy statement. The Fed said that the labor market is strengthening and inflation remains on target, although it did note that the labor market participation rate remains low. As expected the Fed completed the taper of its QE3 program. The asset-purchase program was initially started in 2008, at the height of the economic crisis, in order to boost a weak US economy. The termination of the QE is a symbolic step which is a vote of confidence from the powerful Fed that the US economy is on the right track.

US durable goods looked dismal in September. Core Durable Goods Orders dropped 0.2%, its second decline in three months. This was well short of the estimate of 0.5%. Durable Goods Orders followed suit with a decline of -1.3%. This was a second straight decline, and missed the estimate of 0.4%. There was much better news from CB Consumer Confidence, as the indicator climbed to 94.5 points, up sharply from 86.0 points. The easily beat the estimate of 87.4 and marked a 7-year high.

EUR/USD for Thursday, October 30, 2014

EUR/USD October 30 9:30 GMT

EUR/USD 1.2587 H: 1.2633 L: 1.2655

EUR/USD Technical

• EUR/USD lost ground in the Asian session. The euro remains under pressure in European trade.
• 1.2688 has switched back to a resistance role following strong gains by the US dollar on Wednesday.
• 1.2518 is the next support line. It could face pressure if the euro continues to lose ground.
• 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 long positions on Thursday. This is not consistent with the movement of the pair, as the euro continues to lose ground. The ratio has a majority of long positions, indicative of trader bias towards the euro reversing direction and moving higher.

EUR/USD Fundamentals

• All Day – German Preliminary CPI. Estimate -0.1%.
• 8:00 Spanish Flash CPI. Estimate 0.0%. Actual -0.1%.
• 8:00 Spanish Flash GDP. Estimate 0.5%. Actual 0.5%.
• 8:55 German Unemployment Change. Estimate 4K. Actual -22K.
• Tentative – Italian 10-year Bond Auction.
• 12:30 US Advance GDP. Estimate 3.1%.
• 12:30 US Unemployment Claims. Estimate 284K.
• 14:30 US Advance GDP Price Index. Estimate 2.0%.
• 13:00 Federal Reserve Chair Janet Yellen Speaks.
• 14:30 US Natural Gas Storage. Estimate 83B.

*All release times are GMT

*Key releases are highlighted in bold.

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