EUR/USD is trading quietly as we start the new trading week. The pair is trading in the mid-1.35 range early in Monday’s European session. On Friday, US construction and employment data met expectations, but consumer confidence dipped. Monday’s trade will be light, as US markets are closed for the Martin Luther King holiday. In the Eurozone, German PPI posted a weak gain of 0.1%. The slight gain reversed two straight declines, but points to continuing weak inflation levels in the Eurozone. Germany also releases the monthly Deutsche Bundesbank report.
German PPI, an important inflation indicator, posted a gain of 0.1% in December, shy of the estimate of 0.2%. We continue to see weak inflation numbers out of Europe, and the possibility of deflation is growing. ECB president Mario Draghi didn’t have much to offer at the ECB’s last policy meeting, reiterating 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 sluggish, the ECB may have to take action at its next policy meeting in February.
Last week ended on a busy note in the US, which saw the release of three key events. Building Permits showed little change, coming in at 0.99 million, shy of the estimate of 1.01 million. JOLTS Job Openings rose to 4.00 million, increasing from 3.93 million a month earlier. This beat the estimate of 3.97 million, and was welcome news from the employment front after the recent dismal Non-Farm Payrolls release. UoM Consumer Sentiment dropped to 80.4 points, down from 83.5 in the previous release. This was well below the estimate of 83.4, but a reading over the 80 line is certainly respectable.
Weak inflation levels remain a major concern in the US, as persistently low inflation is an indication of an underperforming economy. This was underscored by Core CPI, which posted a weak gain of just 0.1% in December. Producer Price Index posted a gain of 0.4%, reversing directions after three consecutive declines. Last 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. Analysts will be listening closely as to whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1st.
EUR/USD for Monday, January 20, 2014
EUR/USD January 20 at 10:35 GMT
EUR/USD 1.3551 H: 1.3562 L: 1.3508
- EUR/USD has edged upwards in Monday trading. The pair touched a low of 1.3508 early in the Asian session.
- 1.3585 has reverted to a resistance role. This is a weak line which could face strong pressure during the day. This is followed by a stronger resistance line at 1.3649.
- On the downside, the round number of 1.3500 is providing support. The next support line is at 1.3410.
- Current range: 1.3500 to 1.3585
Further levels in both directions:
- Below: 1.3500, 1.3410, 1.3347 and 1.3257
- Above: 1.3585, 1.3649, 1.3786, 1.3893 and 1.4000
OANDA’s Open Positions Ratio
EUR/USD ratio is pointing to gains in long positions in Monday trading. This is consistent with what we are seeing from the pair, as the euro has started the week with slight gains. The ratio is made up largely of short positions, indicative of a trader bias towards the dollar continuing to move to higher levels.
The euro is not showing much activity to start off the week. With US markets closed for a holiday, we could be in for a quiet Monday from EUR/USD.
- 7:00 German PPI. Estimate 0.2%. Actual 01.%.
- 11:00 German Buba Monthly Report.
*Key releases are highlighted in bold
*All release times are GMT