EUR/USD – Euro Stable, Eurozone PMIs Disappoint

It’s been a disappointing week for those looking for volatility from the euro, as EUR/USD has shown limited movement. The pair is trading at 1.0840 in Friday’s European session. In economic news, Eurozone Service and Manufacturing PMIs missed their estimates. In the US, today’s highlight is Existing Home Sales, with the markets predicting a strong improvement in the December report.

There was more weak data out of the Eurozone on Friday, as French, German and Eurozone PMIs fell short of the forecast. Still the news was not all bad, as all of the indicators were above the 50 level (with the exception of one indicator, which came in at 50.0), pointing to expansion in the services and manufacturing sectors. The currency markets did not react negatively to the PMI reports, as the euro has showed limited movement on Friday. The euro also shrugged off the ECB policy meeting on Thursday, at which the ECB held off from additional monetary easing. ECB President Mario Draghi noted that he reserved the right to “review and reconsider” the ECB’s monetary policy in March. So what does this mean for the markets? Draghi is essentially saying he’s not prepared to make any moves just yet, but the ECB will act if inflation and growth numbers in the bloc worsen in the next two months.

Weak US inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another interest rate hike would be appropriate in early 2016. This was underscored on Wednesday, as key inflation numbers missed their estimates. CPI dropped 0.1%, short of the estimate of 0.0%. Core CPI also softened, posting a gain of 0.1%. This was short of the forecast of 0.2%. Meanwhile, US jobless claims jumped to their highest level in 11 months, as the reading of 293 thousand was much worse than the estimate of 279 thousand. Will these weak numbers dampen Fed enthusiasm for a rate hike? There is speculation that the Fed could make a move in March, contingent on the US economy continuing to show strong numbers. At the same time, minutes from the Federal Reserve Policy meeting in December indicated that some policymakers are concerned that the inflation picture may not improve anytime soon, and it would be premature to raise rates again before inflation levels improve. If inflation indicators don’t point higher, we may not see a rate hike before mid-2016.

EUR/USD Fundamentals

Friday (Jan. 22)

• 2:45 ECB President Mario Draghi Speaks
• 3:00 French Flash Manufacturing PMI. Estimate 51.6 points. Actual 50.0 points 
• 3:00 French Flash Services PMI. Estimate 50.4 points. Actual 50.6 points 
• 3:30 German Flash Manufacturing PMI. Estimate 53.0 points. Actual 52.1 points 
• 3:30 German Flash Services PMI. Estimate 55.6 points. Actual 55.4 points 
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 53.0 points. Actual 52.3 points
• 4:00 Eurozone Flash Services PMI. Estimate 54.2 points. Actual 53.6 points
• 9:45 Eurozone Flash Manufacturing PMI. Estimate 51.5 points
• 10:00 US Existing Home Sales. Estimate 5.21M
• 10:00 US CB Leading Index. Estimate -0.1%

Upcoming Key Events

Monday (Jan. 25)

• 4:00 German Ifo Business Climate

*Key events are in bold

*All release times are EST

EUR/USD for Friday, January 22, 2016

EUR/USD January 22 at 5:50 EST

Open: 1.0839 Low: 1.0813 High: 1.0863 Close: 1.0841

EUR/USD Technical

• EUR/USD showed slight losses in the Asian session and has leveled off in European trade
• 1.0732 is providing strong support
• 1.0847 remains busy and has switched to a resistance line
• Current range: 1.0732 to 1.0847

Further levels in both directions:

• Below: 1.0732, 1.0659 and 1.0537
• Above: 1.0847, 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, reflective of a lack of movement from the pair. Short positions command a majority (56%). This is indicative of trader bias towards the euro moving downwards.

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.