EUR/USD – Euro Briefly Drops Below 1.16, Markets Await Key US Reports

EUR/USD continues to lose ground on Thursday, as the pair trades at the 1.17 line in the European session. The euro slipped as low as 1.1580, its lowest level since November 2003. On the release front, Eurozone Trade Balance improved to EUR 20.0B, but this was short of expectations. Later in the day, the German Bundesbank President Jens Weidmann will deliver remarks in Berlin. It’s a busy day in the US, highlighted by Unemployment Claims. We’ll also get a look at PPI and the Philly Fed Manufacturing Index.

US retail sales caught the markets off guard, with sharp declines in the December readings. Core Retail Sales came in at -1.0%, while Retail Sales followed suit with a loss of 0.9%. Both key indicators recorded their worst showings since May 2010. However, retail sales were solid in the past two months, so the numbers for Q4 will be in positive territory.

US job numbers have looked sharp, and the trend continued on Tuesday, as JOLTS Jobs Openings climbed to 4.97 million, easily beating the forecast of 4.86 million. This is the indicator’s highest level since January 2001. The strong employment numbers are a welcome result of the robust economy, as the deepening recovery fuels demand for more workers. The health of the labor market is an important component of any decision to raise interest rates, so upcoming employment releases will be under the market microscope as the Fed mulls when to raise interest rates.

Eurozone inflation levels remain anemic and the threat of deflation is growing. Earlier this week, German WPI came in at -0.2%, its third straight decline and lowest reading in over a year. The ECB’s inflation target of about 2% is nowhere to be seen and the ECB has not been able to raise inflation, despite lowering interest rates to record lows of 0.05%. ECB head Mario Draghi has said that he will resort to QE if necessary and we could see Draghi make this move at the ECB’s policy meeting on January 22. However, the German central bank has voiced its opposition to QE, and the markets will be listening closely to remarks by the Bank’s President, Jens Weidmann, on Thursday.

EUR/USD for Thursday, January 15, 2015

EUR/USD January 15 at 11:10 GMT

EUR/USD 1.1701 H: 1.1790 L: 1.1580

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has posted losses in the European session, breaking below resistance at 1.1734 and testing support at 1.1634.
• 1.1734 has switched to a resistance role as the pair has dropped to lower levels. 1.1802 is stronger.
• 1.1634 is an immediate support role.
• Current range: 1.1634 to 1.1734

Further levels in both directions:

• Below: 1.1634, 1.1525, 1.1426 and 1.1340
• Above: 1.1734, 1.1802, 1.1926, 1.2042 and 1.2143

OANDA’s Open Positions Ratio

EUR/USD is pointing to gains in short positions on Thursday, reversing the direction seen a day earlier. This is consistent with the pair’s movement, as the euro continues to post more losses. The ratio is showing a split between long and short open positions, indicative of a lack of trader bias towards where the pair is headed next.

EUR/USD Fundamentals

• 10:00 Eurozone Trade Balance. Estimate 21.3B. Actual 20.0B.
• 13:30 US PPI. Estimate -0.3%.
• 13:30 US Unemployment Claims. Estimate 299K.
• 13:30 US Core CPI. Estimate 0.2%.
• 15:00 US Empire State Manufacturing Index. Estimate 5.3 points.
• 15:00 US Philly Fed Manufacturing Index. Estimate 20.3K.
• 15:30 US Natural Gas Storage. Estimate -224B.
• 16:15 German Buba President Jens Weidmann Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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