EUR/USD – Euro Drops Below 1.14, Eurozone Data Mixed

EUR/USD has posted slight losses on Friday, continuing the downward move which we saw in on Thursday. In the European session, the pair is trading at 1.1340. On the release front, German Preliminary GDP rose 0.7%, beating the estimate of 0.6%. However, German Final CPI came in at -0.4%, short of the estimate of -0.2%. We’ll get a look at Eurozone Flash GDP later in the day. The US will release a host of key indicators, including inflation, retail sales and consumer confidence reports. Traders should be prepared for volatility from EUR/USD during the day.

German numbers, which provide analysts with a macro view of the Eurozone economy, were a mix on Friday. Preliminary GDP climbed 0.7% in the first quarter, a  considerable improvement from Final GDP in Q4, which showed a modest gain of 0.3%. Germany will release Final GDP for Q4 later in the month. At the same time, Final CPI declined 0.4% in April, compared to a gain of 0.8% a month earlier. These figures indicate that despite although the German economy is expanding, a lack of inflation remains a pressing concern. The euro is under pressure and is down about 100 points since Wednesday. Meanwhile, Deutsche Bank has raised its forecast for EUR/USD to 1.05 in 2016. Analysts at the bank had previously projected that the euro would drop below parity in 2016, but are now doubtful that the ECB has the monetary ammunition to curb the euro. As well, the analysts wrote that there is a lower likelihood that the Federal Reserve will raise rates.

The Eurozone manufacturing sector continues to struggle, as the soft global economy has meant less demand for European products. Eurozone Industrial Production declined 0.8% in April, compared to a forecast of -0.2%. The indicator is in trouble, as this marked the third decline in four months. Earlier in the week, German Industrial Production was dismal posting a decline of 1.3%, well off the forecast of -0.2%. This marked the fourth decline in the past five readings. The markets had hoped  for better news after German Factory Orders surprised with a strong gain.

With the Federal Reserve staying the course during 2016, the markets are now focusing on the Fed’s next policy meeting in June. Will we see a rate hike for the first time this year? Last week’s soft Nonfarm Payrolls report took out the steam from recent speculation about a June move, but strong US numbers, particularly on the employment and inflation fronts, could quickly change market sentiment. We’ll get a look at Retail Sales, PPI and UoM Consumer Sentiment later on Friday, and these key numbers could play an important role in the Fed’s decision. The Fed will release the minutes of its April meeting next week, and the markets will be combing through the report, looking for hints about what the Fed has planned for this summer.

It continues to be one step forward, one step backward for US job numbers. Unemployment Claims, which have been moving higher, surged last week, hitting 294 thousand. This was the highest weekly claims level since July 2015. On Tuesday, JOLT Job Openings looked sharp in April, jumping to 5.76 million. This figure was much stronger than the estimate of 5.56 million. However, last week’s host of employment numbers were a mix, which predictably has raised concerns about the strength of the US labor market. Last week, Nonfarm Payrolls looked awful, as the key indicator slid to just 160 thousand, well short of the forecast of 203 thousand. This marked the lowest reading in seven months. On a brighter note, wages showed growth, as Average Hourly Earnings posted a second straight gain of 0.3%.

EUR/USD Fundamentals

Friday (May 13)

• 6:00 German Preliminary GDP. Estimate 0.6%. Actual 0.7%
• 6:00 German Final CPI. Estimate -0.4%. Actual -0.2%
• 6:45 French Preliminary Nonfarm Payrolls. Estimate 0.2%. Actual 0.2%
• 8:00 Italian Preliminary GDP. Estimate 0.3%
• 9:00 Eurozone Flash GDP. Estimate 0.6%
• 12:30 US Core Retail Sales. Estimate 0.6%
• 12:30 US PPI. Estimate 0.3%
• 12:30 US Retail Sales. Estimate -0.3%
• 12:30 US Core PPI. Estimate 0.1%
• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 89.9 points
• 14:00 US Business Inventories. Estimate 0.2%
• 14:00 US Revised UoM Inflation Expectations

*Key events are in bold

*All release times are GMT

EUR/USD for Friday, May 13, 2016

EUR/USD May 13 at 8:10 GMT

Open: 1.1374 Low: 1.1328 High: 1.1378 Close: 1.1343

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted losses in the European session
• There is weak resistance at 1.1378
• 1.1278 is providing support

Further levels in both directions:

• Below: 1.1278, 1.1172 and 11054
• Above: 1.1378, 1.1495, 1.1609 and 1.1711
• Current range: 1.1278 to 1.1378

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Friday, consistent with the lack of significant movement from EUR/USD. Short positions command a strong majority (58%). This is indicative of strong trader bias towards EUR/USD continuing to drop to lower levels.

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.