EUR/USD – Little Movement As US Posts Strong Employment and Mfg. Numbers

EUR/USD continues to show limited movement, as the pair trades just below the 1.36 line early in Friday’s European session. On Thursday, US Unemployment Claims met expectations with another strong release, while the Philly Fed Manufacturing Index hit a three-month high. However, Core CPI looked weak, posted a gain of 0.1%. In the Eurozone, CPI and Core CPI met expectations. On Friday, the US releases more key data, with Building Permits, Preliminary UoM Consumer Sentiment and JOLTS Job Openings wrapping up the week. In the Eurozone, today’s sole event, the French Government Budget Balance, showed little change.

US Unemployment Claims looked sharp, dropping slightly to 327 thousand, very close to the estimate of 326 thousand. This was welcome news after last week’s shocking Non-Farm Payrolls. With the Fed finally starting its taper of QE, every employment release will be under the market microscope. Meanwhile, the Philly Fed Manufacturing Index continues to move higher. The indicator jumped to 9.4 points, up from 7.0 points a month earlier. This strong reading beat the estimate of 8.8 points.

Weak inflation levels in the US remain a concern, as this is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1%. On Tuesday, the Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Earlier this week, Chicago Fed President Charles Evans said that the low rate of U.S. inflation is “both puzzling and worrisome,” and enough reason to maintain low interest rates, even if the employment picture continues to brighten.

There was good news out of the Eurozone on Tuesday as Industrial Production looked sharp. The key manufacturing indicator bounced back from a decline of 1.1% in November, posting an excellent gain of 1.8% in December, a multi-year high. This beat the estimate of 1.6%. Meanwhile, the first ECB rate announcement of 2014 was a non-event last week, as the central bank held the benchmark rate at a record low of 0.25%, as expected. ECB president Mario Draghi said that monetary policy will remain accommodative for as long as is needed to help the Eurozone economy recover, and that interest rates will likely remain at present or lower levels for the foreseeable future. If growth and inflation indicators continue to look weak, the ECB may have to take action at its next meeting in February.

EUR/USD for Friday, January 17, 2014

EUR/USD January 17 at 10:25 GMT

EUR/USD 1.3598 H: 1.3621 L: 1.3593

EUR/USD Technical

• EUR/USD is steady in Friday trading, as the proximate support and resistance lines (S1 and R1 above) remain in place. The pair continues to flirt with the 1.36 line.
• 1.3649 is providing resistance. This is followed by a stronger resistance line at 1.3786.
• On the downside, 1.3585 is under strong pressure. The next support line is at the round number of 1.3500.
• Current range: 1.3585 to 1.3649

Further levels in both directions:

• Below: 1.3585, 1.3500, 1.3410 and 1.336
• Above: 1.3649, 1.3786, 1.3893, 1.4000 and 1.4140

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Friday trading. This is consistent with what we are seeing from the pair, as the pair is showing little activity. The ratio is made up largely of short positions, indicative of a trader bias towards the dollar breaking out and moving to higher levels.

The euro continues to look listless for a second straight day, as it shrugged off a strong US Unemployment Claims report on Thursday. With the US releasing three key events on Friday, we could see EUR/USD show some life in the North American session.

EUR/USD Fundamentals

• 7:45 French Government Budget Balance. Actual -87.0B.
• 13:30 US Building Permits. Exp. 1.01M.
• 13:30 US Housing Starts. Exp. 0.99M.
• 14:15 US Capacity Utilization Rate. Exp. 69.2%.
• 14:15 US Industrial Production. Exp. 0.4%.
• 14:55 US Preliminary UoM Consumer Sentiment. Exp. 83.4 points.
• 14:55 US Preliminary UoM Inflation Expectations.
• 15:00 US JOLTS Job Openings. Exp. 3.97M. 

*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.