EUR/USD – Markets Await German, Eurozone Economic Surveys

It continues to be a quiet week for EUR/USD, which is trading quietly on Tuesday. Early in the European session, the pair is trading at 1.1370. In the Eurozone, we’ll get a look at the German and Eurozone ZEW Economic Sentiments reports. These two indicators have been losing ground, and the downturn is expected to continue in the October reports. There are no major events out of the US on Tuesday. Traders should keep a close eye on three key US releases on Wednesday – Core Retail Sales, Retail Sales, and PPI. Any readings which miss expectations could lead to sharp movement by EUR/USD.

The Fed minutes are now behind us, but the key question remains – will the Federal Reserve press the trigger and raise rates in 2015? The markets had circled September as a likely candidate for a rate hike, but the Federal Reserve remained on the sidelines yet again. The Fed released the minutes of its September policy meeting last week, and indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy.

This sentiment was underscored on Monday by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. Clearly, Brainard is of the view that the Fed should take its time and proceed with caution. With global economic conditions unlikely to change anytime soon, a rate move may be on hold unless the US posts some key releases, such as GDP or employment numbers, which match or beat expectations.

A very different view was put forth on Monday by another FOMC member, Dennis Lockhart. Lockhart, considered a centrist on monetary policy, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.

Germany, the Eurozone’s largest economy, posted disappointing manufacturing and trade balance numbers in August. These weaker numbers should not come as a surprise, keeping in mind that the German economy is heavily dependent on exports, and the country sends a larger proportion of exports to China, compared to other countries. The Chinese slowdown shows no sign of improving anytime soon, and investors are nervous that a contraction in the German economy could quickly affect the rest of the bloc and send the fragile Eurozone economy into a tailspin. The markets are bracing for softer readings from Tuesday’s German and Eurozone Economic Sentiment reports. If these indicators don’t meet the estimates, the euro could weaken.

EUR/USD Fundamentals

Tuesday (Oct. 13)

• 6:00 German Final CPI. Estimate -0.2%. Actual -0.2%.
• 6:00 German WPI. Estimate -0.3%. Actual -0.6%.
• 9:00 German ZEW Economic Sentiment. Estimate 6.8 points.
• 9:00 European ZEW Economic Sentiment. Estimate 30.1 points.
• 10:00 US NFIB Small Business Index. Estimate 95.6 points.
• 10:00 US Federal Budget Balance. Estimate 93.8B.

Upcoming Key Events

Wednesday (Oct. 14)

• 12:30 US Core Retail Sales. Estimate -0.1%.
• 12:30 US PPI. Estimate -0.2%.
• 12:30 US Retail Sales. Estimate 0.2%.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Tuesday, October 13, 2015

EUR/USD October 12 at 7:30 GMT

EUR/USD 1.1375 H: 1.1388 L: 1.1351

EUR/USD Technical

• EUR/USD has shown little movement in the Asian and European sessions.
• 1.1296 is an immediate support level.
• 1.1392 is a weak resistance line and is under pressure.
• Current range: 1.1296 to 1.1392

Further levels in both directions:

• Below: 1.1296, 1.1214, 1.1105, 1.1017 and 1.0928
• Above: 1.1392, 1.1470, 1.1658, 1.1712 and 1.1871

OANDA’s Open Positions Ratio

EUR/USD ratio is showing an increase in short positions, which continue to retain a majority of the open positions (62%). This points to trader sentiment in favor of the dollar gaining ground against the euro.

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.