EUR/USD – German Ifo Business Climate Slips, Euro Steady

It’s a quiet start to the week for EUR/USD, which is trading at 1.0820 in the European session. In economic news, German Ifo Business Climate slipped to 107.3 points, missing expectations. There are no US releases on Monday. US CB Consumer Confidence, a key event, will be released on Tuesday.

The euro wrapped up last week with modest losses, as Eurozone PMIs, key indicators of the health of the service and manufacturing sectors in the bloc, all fell short of their estimates. 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 in France, Germany and the Eurozone. At the ECB policy meeting on Thursday, the ECB did not lower interest rates and held off from additional monetary easing. This time the euro did not react with sharp gains, unlike the December ECB meeting, when the lack of action by the central bank surprised the markets, and EUR/USD racked up huge gains. At last week’s meeting, ECB President Mario Draghi noted that he reserved the right to “review and reconsider” the ECB’s monetary policy in March. Draghi reiterated this message at the World Economic Forum in Davos, Switzerland. So what does this mean for the markets? In December, the markets were banking on some strong monetary action from the ECB. When this didn’t materialize, the result was huge volatility from the euro. Draghi doesn’t want a repeat of this fiasco, and is sending out the message that although he’s not prepared to make any moves right now, the ECB could increase monetary easing if inflation and growth numbers in the bloc worsen in the next two months.

US inflation numbers remain low, which has proven to be a sore spot in a generally strong US economy. This was underscored last week, 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%. Weak inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another interest rate hike would be appropriate in early 2016. 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 strength of the US economy. A lack of inflation points to slack in the economy, and the Fed could hold off on another hike until inflation levels improve.

EUR/USD Fundamentals

Monday (Jan. 25)

• 4:00 German Ifo Business Climate. Estimate 108.5 points. Actual 107.3 points 
• 5:00 Italian Retail Sales. Estimate 0.2%. Actual 0.3% 
• 6:00 German Buba Monthly Report. 
• 9:00 Belgian NBB Business Climate. Estimate -1.9 points.
• 13:00 ECB President Mario Draghi Speaks

Upcoming Key Events

Tuesday (Jan. 26)

• 10:00 US CB Consumer Confidence. Estimate 96.6 points

*Key events are in bold

*All release times are EST

EUR/USD for Monday, January 25, 2016

EUR/USD January 25 at 5:30 EST

Open: 1.0816 Low: 1.0789 High: 1.0835 Close: 1.0816

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions.
• 1.0732 is providing support
• 1.0847 is a weak 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

Long positions have posted gains in the EUR/USD ratio, as short and long positions are close to an even split. This points to a lack of trader bias as to which direction the pair will take next.

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.