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EUR/USD – Euro Shrugs off Weak Retail Sales

EUR/USD has gained ground on Wednesday, as the pair trades above the 1.35 line in the European session. Taking a look at economic releases, Spanish and Eurozone Services PMIs beat their estimates but the Italian Services PMI lost ground and fell short of expectations. Eurozone Retail Sales declined 0.6%, its weakest reading in nine months. We’ll get a look at German Factory Orders later in the day. There are no major US releases on Wednesday. On Tuesday, US ISM Non-Manufacturing PMI beat the estimate.

US key releases have started the week on a positive note. The ISM Non-Manufacturing PMI rose to 55.4 points in October, up from 54.4 the month before. This beat the estimate of 54.0 points. We’ll get a look at Unemployment Claims and Non-Farm Payrolls later in the week, and if these numbers are strong, there is sure to be talk of QE tapering in December, as the Fed has said on numerous occasions that the employment market must improve before QE tapering can occur.

Inflation indicators in the Eurozone continue to point to very weak inflation, which in turn signals sluggish economic activity. Eurozone CPI dropped to 0.7% in October, its smallest gain in three years. Eurozone PPI posted a paltry gain of 0.1%, shy of the estimate of 0.3%. Germany, the region’s largest economy, is also producing inflation numbers well below the ECB’s inflation target of 2.0%. Speculation is growing that the ECB could cut rates in order to boost growth, perhaps as early as this week, when the ECB holds a policy meeting.

The Eurozone continues to post weak inflation and low growth, and the markets are keeping a close eye on Thursday’s policy meeting. There is speculation that the ECB will reduce interest rates, something it hasn’t done since April. The argument against cutting interest rates is that with rates already at a record low of 0.50%, a cut of 0.25% might not have much impact. Other tools available to the ECB include a new LTRO or introducing a negative deposit rate. With all this uncertainty in the air, we could see some volatility from the euro this week.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed’s policy statement was less dovish than expected, as the Fed noted that the economy was expanding “at a moderate pace” and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.


EUR/USD for Wednesday, November 6, 2013

Forex Rate Graph 21/1/13

EUR/USD November 6 at 11:00 GMT

EUR/USD 1.3507 H: 1.3521 L: 1.3468


EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3325 1.3410 1.3500 1.3585 1.3649 1.3786


Further levels in both directions:


OANDA’s Open Positions Ratio

EUR/USD ratio continues to point to gains by long positions in Wednesday trading. This is reflected in the current movement of the pair, as the euro has posted gains at the expense of the dollar.

EUR/USD continues to trade close to the 1.35 line, and has managed to post gains despite some weak data out of the Eurozone on Wednesday. With no major releases out of the US today, the pair’s movement could be limited.


EUR/USD Fundamentals


*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.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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