EUR/USD – Below 1.19 as Eurozone CPI Declines for First Time Since 2009

EUR/USD has posted slight losses on Wednesday trading in the mid-1.18 range. The euro has lost 150 points so far this week, as the common currency continues its move downward. On the release front, it’s a busy schedule in the Eurozone and in the US. Eurozone CPI disappointed with a decline of 0.2%. German data was positive, as Retail Sales jumped 1.0% and Unemployment Claims dropped by 27 thousand. In the US, today’s key releases are the ADP Nonfarm Payrolls and Trade Balance. As well, the Federal Reserve will release the minutes of its last policy meeting.

Eurozone inflation numbers remain mired at low levels. Eurozone CPI dipped to -0.2% in December, its first decline since September 2009. German Preliminary CPI remained stuck at 0.0% in December, unchanged from the November report. This missed the very modest estimate of 0.1%. The readings come at a crucial time, with the ECB holding a policy meeting on January 22. With the threat of deflation hanging over the Eurozone like a dark cloud, the ECB could respond with quantitative easing, which would mean buying large amounts of Eurozone bonds. QE worked well in the US, but the Federal Reserve was calling the shots and was able to implement and then taper QE as it pleased. It’s a far different story in Europe, as the powerful German Bundesbank has voiced its opposition to such a move and ECB head Mario Draghi will find it difficult to take such a dramatic step without a strong consensus. If the ECB does pull the ECB trigger, the shaky euro is likely to fall even further early in 2015.

In the US, the ISM Non-Manufacturing PMI, a key indicator, dropped sharply to 56.2 points in December, its lowest reading in six months. The index was well off the forecast of 58.2 points. On the manufacturing front, there was more bad news as Factory Orders posted a drop of 0.7%, marking a fourth straight decline. This was short of the forecast of -0.3%. This follows a disappointing Manufacturing PMI, which also missed  expectations. There was more bad news from the manufacturing front on Tuesday, as Factory Orders posted a drop of 0.7%, marking a fourth straight decline. This was short of the forecast of -0.3%.

EUR/USD for Wednesday, January 7, 2015

EUR/USD January 7 at 11:00 GMT

EUR/USD 118.52 H: 1.1896 L: 1.1842

 

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1638 1.1734 1.1802 1.1926 1.2042 1.2143

 

  • EUR/USD was flat in the Asian session. The pair has edged lower in European trade.
  • 1.1926 is an immediate resistance line.
  • 1.1802 is a weak support line. 1.1734 is stronger.
  • Current range: 1.802 to 1.1926

Further levels in both directions:

  • Below: 1.1802, 1.1736, 1.1638 and 1.1525
  • Above: 1.1926, 1.2042, 1.2143, 1.2286 and 1.2407

 

OANDA’s Open Positions Ratio

EUR/USD is pointing to gains in long positions on Wednesday, reversing the direction seen a day earlier. This is not consistent with the pair’s movement, as the euro has posted slight losses. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

  • 7:00 German Retail Sales. Estimate 0.2%. Actual 1.0%.
  • 8:55 German Unemployment Change. Estimate -6K. Actual -27K.
  • 9:00 Italian Monthly Unemployment Change. Estimate 13.3%. Actual 13.4%.
  • 9:10 Eurozone Retail PMI. Actual 47.6 points.
  • 10:00 Eurozone CPI Flash Estimate. Estimate 0.0%. Actual -0.2%.
  • 10:00 Eurozone CPI Flash Estimate. Estimate 0.6%. Actual 0.8%.
  • 10:00 Eurozone Unemployment Rate. Estimate 11.5%. Actual 11.5%.
  • 10:00 Italian Preliminary CPI. Estimate -0.2%. Actual 0.0%.
  • 13:15 US ADP Nonfarm Employment Change. Estimate 227K.
  • 13:30 US Trade Balance. Estimate -42.3B.
  • 15:30 US Crude Oil Inventories. Estimate 0.9M.
  • 19:00 US FOMC Meeting Minutes.
  • 23:30 FOMC Member Charles Evans 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.