EUR/USD – Euro Close to 2-Year Lows After Draghi Remarks

EUR/USD is stable on Monday, as the pair trades at the 1.24 line in the European session. On the release front, there was good news out of Germany, as Ifo Business Climate improved to 104.7 points in November. Later in the day, we’ll get a look at Belgian NBB Business Climate. In the US, it’s a quiet start to the week, with just one release on the calendar, Flash Services PMI. No change is expected in this reading.

The euro hasn’t had much to cheer about lately, and the currency took a tumble on Friday, losing over 150 points. This was a result of remarks from ECB head Mario Draghi, who warned that that inflation expectations were declining to levels that were very low and said the ECB is ready to expand its stimulus program. Deep interest rate cuts haven’t boosted growth or inflation, so the ECB has reached deeper into its toolbox and purchased covered bonds and asset-backed securities. So far, these purchases have been from the private sector, but the ECB could decide to expand these purchases to government bonds, known has quantitative easing (QE). However, there is strong resistance to QE from national central banks, such as the powerful German Bundesbank.

Eurozone and German PMIs softened in November, underscoring weakening activity in the manufacturing and services sectors. German Flash Manufacturing PMI dipped to 50.0 points, the separator between contraction and expansion. This marked the first month that the key indicator has failed to show expansion since June 2013. Eurozone Flash Manufacturing followed course, dipping to 50.4 points. This was the lowest reading recorded since June 2013.

In the US, there was a flurry of releases on Thursday. Consumer inflation met expectations, as CPI came in at 0.0% and Core CPI posted a gain of 0.2%. Unemployment Claims were almost unchanged, with a reading of 291 thousand. Philly Fed Manufacturing Index soared to 40.8 points and US Existing Home Sales improved to 5.26 million.

EUR/USD for Monday, November 24, 2014

EUR/USD November 24 11:00 GMT

EUR/USD 1.2408 H: 1.2414 L: 1.2372

EUR/USD Technical

• EUR/USD posted slight gains in the Asian session. The pair has been choppy in the European session.
• 1.2518 switched to a resistance role after the euro posted strong losses on Friday. It is a strong line.
• 1.2407 was tested earlier and remains fluid. 1.2286 is stronger.
• Current range: 1.2407 to 1.2518

Further levels in both directions:

• Below: 1.2407, 1.2286, 1.2143 and 1.2042
• Above: 1.2518, 1.2688, 1.2806, 1.2905 and 1.2995

OANDA’s Open Positions Ratio

EUR/USD ratio currently has a majority of long positions. This is indicative of trader bias towards the euro gaining ground.

EUR/USD Fundamentals

• 9:00 German Ifo Business Climate. Estimate 103.0 points. Actual 104.7 points.
• 14:00 Belgian NBB Business Climate. Estimate -5.3 points.
• 14:45 US Flash Services PMI. Estimate 57.3 points.

*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.