EUR/USD – Little Movement as Listless Trading Continues

EUR/USD is showing little movement in Wednesday trading, as the pair continues to trades in the mid-1.35 range in the European session. The euro has had a quiet week so far, and this pattern could extend into Wednesday, with no releases scheduled out of the Eurozone or the US. Meanwhile, the World Economic Forum kicks off in Davos, Switzerland. Thursday will be very busy, with a host of PMI releases out of Europe. As well, the US will release the all-important Unemployment Claims.  

The World Economic Forum kicks off Wednesday in Davos, Switzerland. The prestigious event will see senior political officials, head of foreign banks and business people from dozens of countries meet and mingle. Traders should note that currency markets can be affected by statements issued at the forum, particularly those made by central bankers or other senior officials.

German ZEW Consumer Sentiment didn’t show much change in December, coming in at 61.7 points, compared to 62.0 points a month earlier. However, the key indicator fell well short of the estimate of 63.4 points. European ZEW Consumer Sentiment surprised the markets with a sharp rise, climbing to 73.3 points, up from 68.3 a month earlier. This easily beat the estimate of 70.2 points. The euro didn’t show much response to the releases.

We continue to see weak inflation numbers out of Europe and this was underscored by Monday’s release of German PPI, which posted a paltry gain of 0.1% in December. As inflation indicators remain listless, concerns of deflation are increasing. 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, such as lowering the benchmark interest rate or reducing deposit rates into negative territory.

Weak inflation concerns are not restricted to Europe, as the US has also been plagued by persistently low inflation, 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 watching closely whether incoming Fed chair Janet Yellen shares these sentiments. Yellen takes over the helm of the Federal Reserve on February 1, replacing Bernard Bernanke.

EUR/USD for Wednesday, January 22, 2014

EUR/USD January 22 at 11:00 GMT

EUR/USD 1.3543 H: 1.3580 L: 1.3535

EUR/USD Technical

• EUR/USD remains steady in Wednesday trading. The pair touched a high of 1.3580 in the Asian session, but has since retracted.
• 1.3585 continues to provide resistance. This is followed by a stronger resistance line at 1.3649.
• On the downside, the round number of 1.3500 is providing support. This is not a strong line and could face strong pressure if the euro loses ground. 1.3410 is a stronger support line.
• 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 unchanged in Wednesday trading. This is consistent with what we are seeing from the pair, which 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 show little movement this week. With no releases out of the Eurozone or the US on Wednesday, the subdued activity from EUR/USD could continue.

EUR/USD Fundamentals

• There are no releases out of the Eurozone or the US on Wednesday.

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.