Euro Steady, German Business Climate Misses Estimate

EUR/USD has started the new trading week with slight gains. The pair is trading at 1.1250 in the Monday’s European session. In economic news, German Ifo Business Climate came in at 106.6, short of expectations. In the US, today’s only event is New Home Sales. The markets are expecting an improvement in the March report, with an estimate of 521 thousand. On Tuesday, the US releases two major events – Core Durable Goods Orders and CB Consumer Confidence.

German key releases are closely watched by the markets, as Germany is the largest economy in the Eurozone. German Ifo Business Climate was almost unchanged in March, coming in at 106.6 points. The markets were looking for more, as the indicator missed the estimate of 107.1. On Friday, German Manufacturing PMI climbed to 51.9 points in March, indicative of slight expansion in the manufacturing sector. This figure beat the estimate of 51.0 points. We’ll get a good look at additional German numbers during the week, including CPI and retail sales reports. Any surprises could affect the movement of EUR/USD.

As expected, the ECB remained on the sidelines at its April policy meeting on Thursday. The ECB left the benchmark interest rate at a record low of zero. The deposit rate remained at -0.4%, and the marginal lending rate stayed at 0.25%. As well, the ECB kept its asset-purchase program (QE) pegged at EUR 80 billion/month. The lack of moves contrasted sharply with the March meeting, when the ECB raised QE from EUR 60-80 billion euros/month. In a follow-up press conference after last week’s meeting, ECB president Mario Draghi presented a dovish message, hinting that further rate cuts remained a strong possibility. Draghi said that he expected interest rates to “remain at present or lower, levels for an extended period of time and well past the horizon of asset purchases“.  Given that the ECB has put in place its QE program until March 2017, it seems a safe bet that the ECB will maintain very low interest rates well into next year. The dovish message from Draghi pushed the euro lower, as the EUR/USD slipped to its lowest level in three weeks.

The US labor market continues full steam ahead, as the weekly unemployment claims indicator fell to 247 thousand on Friday. This was well below the forecast of 265 thousand, and marked the lowest weekly count since November 1973. The unemployment claims four-week moving average, which is considered more accurate than the weekly indicator, also dropped compared to the previous release. The good news was tempered by a disappointing key manufacturing report. The Philly Fed Manufacturing Index surprised the markets with a decline of -1.6 points, as the estimate stood at 8.1 points. This reading marked the third decline in four readings, as the manufacturing sector remains a weak area of the US economy. Uncertainty in global economic conditions has lead to weaker demand for US goods and put the squeeze on domestic manufacturers.

EUR/USD Fundamentals

Monday (April 25)

  • 8:00 German Ifo Business Climate. Estimate 107.1. Actual 106.6
  • 13:00 Belgian NBB Business Climate. Estimate -4.0 points
  • 14:00 US New Home Sales. 521K

Tuesday (April 26)

  • 12:30 US Core Durable Goods Orders. Estimate 0.6%
  • 14:00 US CB Consumer Confidence. Estimate 95.8 points

*Key events are in bold

*All release times are GMT

EUR/USD for Monday, April 25, 2016

EUR/USD April 25 at 8:40 GMT

Open: 1.1231 Low: 1.1221 High: 1.1263 Close: 1.1256

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0989 1.1087 1.1172 1.1278 1.1378 1.1495
  • EUR/USD posted small gains in the Asian and European sessions
  • 1.1172 is providing support
  • 1.1278 is a weak resistance line. It could be tested during the day

Further levels in both directions:

  • Below: 1.1172, 1.1087 and 1.0989
  • Above: 1.1278, 1.1378, 1.1495 and 1.1609
  • Current range: 1.1172 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio showed movement towards long positions on Friday, consistent with losses by EUR/USD, which covered some short positions. Short positions currently command a strong majority (62%), indicative of strong trader bias towards EUR/USD reversing directions and moving 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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.