EUR/USD – Euro Steady Despite Dismal German Economic Sentiment

EUR/USD is unchanged on Tuesday, continuing the lack of movement which marked the Monday session. The pair is currently trading at 1.1060. On the release front, German ZEW Economic Sentiment plunged, coming in at -6.8 points. The Eurozone ZEW Economic Sentiment followed suit with a reading of -14.7 points. Both indicators were well short of expectations. In the US, we’ll get a look at construction data, with the release of Building Permits and Housing Starts. Neither indicator is expected to show much change in the June reports.

German ZEW Economic Sentiment, a highly regarded report, shocked the markets by posting a sharp decline in July, the first since October 2014. The reading of -6.8 points was nowhere near the forecast of +8.2 points, and recorded a sharp downturn after a gain of 19.2 points in June. Eurozone ZEW Economic Sentiment followed suit with a reading of -14.7 points, compared to an estimate of +12.3 points. In June, the index boasted a strong gain of 20.2 points. These dismal readings point to deep pessimism on the part of institutional investors and analysts, as the shock Brexit vote has no doubt contributed to the pessimistic outlook in Germany and the Eurozone.

The Eurozone continues to struggle with weak inflation levels. Final CPI was up 0.1% in June. This isn’t much to cheer about, but any gains are welcome, as this was only the second reading in positive territory in 2016. Final Core CPI, which excludes items such as food and alcohol, showed a respectable gain of 0.9%. German inflation numbers dipped in June, although they managed to meet market expectations. German Final CPI gained just 0.1%, down from 0.3% in the previous release. German WPI climbed 0.6%, compared to 0.9% in the May report. With inflation mired at low levels, the ECB is under pressure to adopt further monetary easing, but even this may not be enough to kick-start a languishing economy. The ECB will hold a policy meeting on Thursday, with the benchmark rate expected to remain at a flat 0.00%.

US consumer indicators were on center stage on Friday, and the numbers were a mixed bag. Consumer inflation reports posted small gains of 0.2%, as inflation levels remain soft. There was better news on the consumer spending front, as Core Retail Sales posted a strong gain of 0.7%, beating the estimate. The UoM Consumer Sentiment report dipped below the 90-point level for the first time in three months, missing expectations. The Federal Reserve is unlikely to raise rates before September at the earliest, unless there is some strong improvement in economic data, particularly inflation and wage growth, which remain at low levels.

EUR/USD Fundamentals

Tuesday (July 19)

  • 9:00 German ZEW Economic Sentiment. Estimate +8.2 points. Actual -6.8 points
  • 9:00 Eurozone ZEW Economic Sentiment. Estimate +12.3 points. Actual -14.7 points
  • 12:30 US Building Permits. Estimate 1.15M
  • 12:30 US Housing Starts. Estimate 1.17M

* Key releases are in bold

*All release times are GMT

EUR/USD for Tuesday, July 19, 2016

EUR/USD July 19 at 9:15 GMT

Open: 1.1068 High: 1.1080 Low: 1.1050 Close: 11058

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0821 1.0925 1.1054 1.1150 1.1278 1.1376
  • EUR/USD was flat in the Asian session and has posted small losses in European trade
  • 1.1054 is fluid and was tested earlier as a support level. It could break during the Tuesday session
  • There is strong resistance at 1.1150

Further levels in both directions:

  • Below: 1.1054, 1.0925 and 1.0821
  • Above: 1.1150, 1.1278, 1.1376 and 1.1495
  • Current range: 1.1054 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Tuesday, consistent with the lack of movement from EUR/USD. Short positions retain a majority (57%), indicative of trader bias towards EUR/USD breaking out and moving 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.

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.