EUR/USD – Euro Starts Week With Slight Losses

EUR/USD has posted slight losses, on Monday as the pair trades at 1.1120 in the European session. On the release front, it’s a very quiet start to the week, with only one event on the schedule. Eurozone Industrial Production posted a strong gain of 2.1%, beating expectations. There are no US releases to start the week, but on Tuesday we’ll get a look at Retail Sales and PPI reports.

The euro has retreated slightly since its roller-coaster ride on Thursday, which saw the currency jump over 200 points as it briefly punched past the 1.12 level. The euro initially dropped after the ECB announced it was lowering interest rates and expanding its bond-purchase program, but then surged higher  after ECB head Mario Draghi stated in a press conference that the ECB was not planning any further rate cuts. The ECB surprised the markets by adopting bold monetary moves. The central bank applied the axe to interest rates, cutting the benchmark rate from 0.05 percent to zero percent, and further lowering deposit rates from -0.3% to -0.4%. The ECB also announced it would expand its bond-purchase program (QE), starting in April, from EUR 60 billion to 80 billion each month.Pressure had been building for months on the ECB to take action, as growth and inflation levels remain sluggish. The markets were genuinely surprised at the robust moves announced by the ECB, as the central bank disappointed in December when it remained on the sidelines.

After Monday, it’s a busy week on the US release front, and that could spell significant volatility in the currency markets. The US will release inflation and retail sales reports on Tuesday, followed by the FOMC policy statement. Will the Federal Reserve raise interest rates? Most experts say no, given current economic conditions. The economy continues to expand, although growth has been softer in 2016 compared to the red-hot pace which marked the economy in H2 of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. The cautious Fed will likely wait until mid-2016, and seriously consider a rate hike if the US economy shows that it is gaining steam.

EUR/USD Fundamentals

Monday (March 14)

• 6:00 Eurozone Industrial Production. Estimate 1.7%. Actual 2.1%

Tuesday (March 15)

• 8:30 US Core Retail Sales. Estimate -0.2%
• 8:30 US PPI. Estimate -0.2%
• 8:30 US Retail Sales. Estimate -0.1%

*Key events are in bold

*All release times are EST

EUR/USD for Monday, March 14, 2016

EUR/USD March 14 at 6:10 EST

Open: 1.1165 Low: 1.1112 High: 1.167 Close: 1.1124

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has posted losses in European trade
• 1.1087 has switched to support following sharp gains by the pair on Thursday
• 1.1172 is a weak resistance line

Further levels in both directions:

• Below: 1.1087, 1.0941, 1.0847 and 1.0708
• Above: 1.1172 and 1.1278 and 1.1387

OANDA’s Open Positions Ratio

EUR/USD ratio is showing strong movement towards short positions, consistent with sharp gains by EUR/USD, which has resulted in the covering of long positions. Short positions have a strong majority (64%), indicative of strong trader bias towards EUR/USD continuing to head lower.

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.