EUR/USD – Euro Weakens as German Retail Sales Plunge

EUR/USD continues to lose ground on Friday, as the pair trades in the mid-1.25 range in the European session. On the release front, it’s a busy day in the Eurozone and the US. In the Eurozone, German Retail Sales posted a sharp decline of 3.2%. French Consumer Spending came in at -0.8%. In the US, today’s highlight is Revised UoM Consumer Sentiment. The markets are expecting the indicator’s upward trend to continue, with the estimate standing at 86.4 points.

It’s been a rough week for German releases, as the Eurozone’s largest economy continues to struggle. On Friday, Retail Sales were dismal, plunging by 3.5%. This marked the sharpest decline since October 2007. The markets had expected a decline of 0.8%. Consumer Climate and CPI softened in September, although Unemployment Change was better than expected. Meanwhile, Eurozone CPI edged upwards to 0.4%, matching the forecast. Core CPI and the Unemployment Rate remained unchanged, at 0.7% and 11.5% respectively.

It was another solid performance from US GDP, which posted a strong gain of 3.5% in Q3, ahead of the estimate of 3.1%. Although this was short of the Q2 reading of 4.0%, the two readings mark the strongest six-month gain we’ve seen in ten years. Unemployment Claims increased slightly to 287 thousand, slightly higher than the previous reading of 284 thousand. However, the four-week average remains at multi-year lows, pointing to an improving labor market.

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.

EUR/USD for Friday, October 31, 2014

EUR/USD October 31 6:00 GMT

EUR/USD 1.2567 H: 1.2609 L: 1.2541

EUR/USD Technical

• EUR/USD weakened late in the Asian session. The euro is stable in European trade.
• 1.2688 remains a strong resistance line.
• 1.2518 is an immediate support level. 1.2407 is stronger.
• 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 Friday, continuing the trend seen a day earlier. 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

• 7:00 German Retail Sales. Estimate -0.8%. Actual -3.2%.
• 7:45 French Consumer Spending. Estimate -0.3%. Actual -0.8%.
• 9:00 Italian Monthly Unemployment Rate. Estimate 12.4%. Actual 12.6%.
• 10:00 Eurozone CPI Flash Estimate. Estimate 0.4%. Actual 0.4%.
• 10:00 Eurozone Core CPI Flash Estimate. Estimate 0.8%. Actual 0.7%.
• 10:00 Eurozone Unemployment Rate. Estimate 11.5%. Actual 11.5%.
• 10:00 Italian Preliminary CPI. Estimate -0.1%. Actual +0.1%.
• 12:30 US Core CPI Price Index. Estimate 0.1%.
• 12:30 US Employment Cost Index. Estimate 0.6%.
• 12:30 US Personal Spending. Estimate 0.2%.
• 12:30 US Personal Income. Estimate 0.3%.
• 13:45 US Chicago PMI. Estimate 60.2 points.
• 13:55 US Revised UoM Consumer Sentiment. Estimate 86.4 points.
• 13:55 US Revised UoM Inflation Expectations.

*All release times are GMT

*Key releases are highlighted in bold.

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