EUR/USD – Euro Loses Ground As German Inflation Slips

EUR/USD is lower on Wednesday, as the pair has reversed directions after yesterday’s gains. The pair is trading in the low-1.35 range in the European session. In economic news, German PPI declined, as Eurozone inflation indicators continue to look weak. In the US, the markets will be busy as there are four key releases on the schedule – Core CPI, Core Retail Sales, Retail Sales and Existing Home Sales. Later on Wednesday, the Federal Reserve will release the minutes of its previous policy meeting. 

Eurozone inflation indicators continue to post numbers far below the ECB’s inflation target of 2.0%. German Producer Price Index dipped 0.2%, its third decline in the past four releases. The estimate stood at 0.1%. The low inflation numbers underscore weak economic activity in the Eurozone, and this could make things difficult for the euro.

Speaking on Tuesday, Fed Reserve Chair Bernard Bernanke said that the Fed remained committed to the current accommodative monetary policy, which stands at $85 billion in asset purchases every month. Bernanke state that the Fed would not taper QE before it was sure that the employment picture continued to improve. Similar sentiments were expressed by Janet Yellen last week when she testified before a senate committee. Yellen is expected to take over as the new head of the Federal Reserve in January.

On Wednesday, the Federal Reserve will release the minutes of its most recent policy meeting. This event is a market-mover and analysts will be paying close attention to the minutes, especially regarding QE. The markets are expecting the Fed to hold off from tapering in December, as US numbers are still not as strong as the Fed would like. Market sentiment is leaning towards the Fed sticking to its present monetary policy, and any surprises in the minutes would likely shake up the currency markets.

Speculation continues on a daily basis as to when the Fed will scale back its QE program, yet we continue to see low volatility in the markets. What gives? The lack of activity could mean one of two things – either the markets are not expecting a taper in the near future, or they are prepared for a reduction should the Fed press the taper trigger. EUR/USD continues to show little movement, and last week the one-month implied volatility on the pair posted its lowest reading since 2007. Of course, things can change quickly in the currency markets, but for now, the EUR/USD waters remain calm.

EUR/USD for Wednesday, November 20, 2013

EUR/USD November 20 at 11:40 GMT

EUR/USD 1.3527 H: 1.3564 L: 1.3517

EUR/USD Technical

• EUR/USD has lost ground in Wednesday trading. The pair dropped in the Asian session and has steadied in European trading.
• On the downside, the round number of 1.3500 is providing support. This is a weak line which could see pressure during the day. This is followed by a stronger support level at 1.3410.
• The pair is facing resistance at 1.3585. Next, there is resistance at 1.3649, which has been remained intact since late October.
• Current range: 1.3500 to 1.3585

Further levels in both directions:

• Below: 1.3500, 1.3410, 1.3325, 1.3265 and 1.3149
• Above: 1.3585, 1.3649, 1.3786 and 1.3893

OANDA’s Open Positions Ratio

EUR/USD ratio has posted losses in Wednesday trading. This is reflected in the pair’s movement, as the euro has lost ground against the dollar. A large majority of the open positions remain short, indicative of a trader bias towards the dollar posting gains against the euro.

The pair is trading in the low-1.35 range. With a host of major releases out of the US later in the day, including the Federal Reserve minutes, we could see some volatility from the pair during the North American session.

EUR/USD Fundamentals

12:00 Fed Chairman Bernard Bernanke Speaks.

• 7:00 German PPI. Estimate 0.1%. Actual -0.2%.
• 13:30 US Core CPI. Estimate 0.1%.
• 13:30 US Core Retail Sales. Estimate 0.1%.
• 13:30 US Retail Sales. Estimate 0.1%.
• 13:30 US CPI. Estimate 0.0%
• 15:00 US Existing Home Sales. Estimate 5.17M.
• 15:00 US Business Inventories. Estimate 0.3%.
• 15:00 FOMC Member William Dudley Speaks.
• 15:30 US Crude Oil Inventories. Estimate -0.2M.
• 17:10 FOMC Member James Bullard Speaks.
• 19:00 US FOMC Meeting Minutes.

*Key releases are highlighted in bold

*All release times are GMT

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