EUR/USD broke out of a listless week on Thursday, as the pair has climbed over 100 points. In the European session, the pair is trading in the mid-1.36 range. In economic news, Eurozone PMIs were mostly higher, giving the euro a strong boost. As well, Eurozone Current posted a larger surplus in December, hitting an eight-month high. Spanish Employment remained unchanged, coming in at 26.0%. We’ll get a look at the first US events of the week, with the release of Unemployment Claims and Existing Home Sales. The markets are expecting strong December numbers from both key releases.
Eurozone PMIs were strong on Thursday, giving a big boost to the euro. French Service and Manufacturing PMIs beat the estimates, although both remain in contraction stage. German Manufacturing PMI posted a gain in December, but the Services PMI dipped lower, missing the estimate. Eurozone Services and Manufacturing PMIs both beat the estimates. These readings are welcome news, as recent Eurozone releases have not looked impressive.
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.
Spain has been a pleasant surprise, reeling off some strong numbers in recent readings. However, it was more of the same from the Unemployment Rate, which was unchanged in Q4 at 26.0%. This marks the sixth straight quarter that the unemployment rate has been above 25%.The economy is slowing slight growth, but unemployment is expected to remain at these very high levels.
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 Thursday, January 23, 2014
EUR/USD January 23 at 11:45 GMT
EUR/USD 1.3630 H: 1.3646 L: 1.3541
- EUR/USD has posted strong gains in Thursday trading. The pair jumped to a high of 1.3646 earlier in the European session.
- 1.3585 has reverted to a support role as the euro trades at higher levels. This is followed by stronger support at the round number of 1.3500.
- 1.3649 is providing resistance. This is followed by a resistance line at 1.3786, which has remained intact since late December.
- Current range: 1.3585 to 1.3649
Further levels in both directions:
- Below: 1.3585, 1.3410, 1.3347 and 1.3257
- Above: 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 Thursday trading. This is consistent with what we are seeing from the pair, as the euro has posted sharp gains. The ratio is made up largely of short positions, indicative of a trader bias towards the dollar reversing directions and moving higher against the euro.
The euro has broken out and posted sharp gains on Thursday. We could be in for more volatility in the North American session, with the US releasing key employment and housing data later in the day.
- 8:00 French Flash Manufacturing PMI. Estimate 47.6 points, Actual 48.8 points.
- 8:00 French Flash Services PMI. Estimate 48.2 points. Actual 48.6 points.
- 8:00 Spanish Unemployment Rate. Estimate 26%. Actual 26.0%.
- 8:30 German Flash Manufacturing PMI. Estimate 54.7 points. Actual 56.3 points.
- 8:30 German Flash Services PMI. Estimate 54.1 points. Actual 53.6 points.
- 9:00 Eurozone Current Account. Estimate 19.2B. Actual 23.5B.
- 9:00 Eurozone Flash Manufacturing PMI. Estimate 53.2 points. Actual 53.9 points.
- 9:00 Eurozone Flash Services PMI. Estimate 51.5, actual 51.9 points.
- Day 2 – WEF Annual Meetings.
- 13:30 US Unemployment Claims. Estimate 331K.
- 14:00 US Flash Manufacturing PMI. Estimate 55.2.
- 14:00 US HPI. Exp. 0.4%.
- 15:00 US Existing Home Sales. Estimate 4.94M.
- 15:00 US CB Leading Index. Estimate 0.2%.
- 15:30 US Natural Gas Storage. Estimate -112B.
- 16:00 US Crude Oil Inventories. Estimate 0.7M.
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