EUR/USD – Euro Takes Break After Sharp Gains

EUR/USD is showing little activity in Friday trading. The pair has settled down since gaining almost two cents on Wednesday, after the Federal Reserve balked at any QE tapering. The pair is trading in the low-1.35 range in Friday’s European trading. In economic news, the US posted excellent numbers on Thursday, led by a solid Unemployment Claims release. However, this was not enough to bolster the struggling US dollar. Friday has just one economic release – Eurozone Consumer Confidence. We could see some movement from EUR/USD as several Federal Reserve policymakers speak, including FOMC Member James Bullard, who will address an event in New York City.

The markets continue to try and recover their composure after the US Federal Reserve stunned the markets in deciding not to taper QE at its policy meeting on Wednesday. Most analysts had expected the Fed to announce a scaling down of the present bond-buying program of $85 billion/month by as much as $15 billion/month. However, the Fed decided to stay the QE course for now, stating that the US economic data was not strong enough to warrant QE tapering at this time. The Fed also downgraded its forecast for the economy, estimating GDP growth for 2013 at 2.0-2.3%, down from 2.3-2.6% in an earlier forecast. It also lowered its outlook for 2014 from 2.9%-3.1%, down from 3.0-3.5%. The euro hammered the dollar after the decision, with EUR/USD rising close to two cents.

Overshadowed by the FOMC Statement were some excellent US releases on Thursday. Unemployment Claims came in at 309 thousand, well below the estimate of 331 thousand. Existing Home Sales rose to 5.48 million, crushing the estimate of 5.27 million, and posting its best level in over three years. The Philly Fed Manufacturing Index rocketed from 9.3 to 22.3 points, its best showing since May 2011. Perhaps if we’d seen this kinds of numbers a week or two ago, the Fed might have introduced QE tapering. In any event, the strong numbers failed to bolster the struggling US dollar.

Over in Europe, German and Eurozone ZEW Economic Sentiment were released earlier in the week, and both posted impressive gains in August. The German indicator climbed from 42.0 to 49.6 points, beating the estimate of 45.3 points. This was the indicator’s best level since April 2010. However, Eurozone ZEW Economic Sentiment stole the show, rocketing from 44.0 to 58.6 points, a tremendous gain. This crushed the estimate of 47.2 points, and was the highest level recorded since September 2009. These excellent readings reflect the view of financial market experts that the German and Eurozone economies are picking up steam, and further strong data out of the euro would likely lift the euro higher.

EUR/USD for Friday, September 20, 2013

EUR/USD 1.3518 H: 1.3542 L: 1.3516

EUR/USD Technical

• EUR/USD is trading quietly in the low-1.35 range in Friday trading.
• The pair is facing resistance at 1.3585. The next line of resistance is at 1.3649.
• On the downside, there is support at 1.3410. This is followed by support at the round number of 1.3300.
• Current range: 1.3476 to 1.3585

Further levels in both directions:

• Below: 1.3476, 1.3410, 1.3300, 1.3162 and 1.3100
• Above: 1.3585, 1.3649, 1.3786, 1.3893 and 1.4000

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Friday trading. This is reflected in the current movement of the pair, as the pair is showing very little activity. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar reversing course and making gains at the expense of the euro.

EUR/USD is taking a well-deserved break after sharp mid-week gains. There are no major releases on the Friday schedule, but with several Fed policymakers delivering speeches, we could see some movement from EUR/USD during the day.

EUR/USD Fundamentals

• 11:30 German Buba President Jens Weidmann Speaks.
• 14:00 Eurozone Consumer Confidence. Estimate -14 points.
• 16:30 US FOMC Member Esther George Speaks.
• 16:40 US FOMC Member Daniel Tarullo Speaks.
• 16:55 US FOMC Member James Bullard Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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.