EUR/USD – Steady After Recent Plunge

EUR/USD is steady in Monday trading, as the pair trades at the 1.35 line in the European session. The euro took it on the chin last week, losing 200 points against the surging US dollar. In Monday’s economic news, Eurozone PMIs were positive. In the US, today’s highlight is ISM Manufacturing PMI.

February started the month on the right foot, as Eurozone PMIs continue to point to expansion. There was more good news out of Spain, as Spanish Manufacturing PMI improved to 52.2 points, above the estimate of 51.3. The index has spent most of the second half of 2013 above the 50-point level, indicating ongoing expansion in the manufacturing sector. Italian Manufacturing PMI showed little change at 53.1 points, a good reading but short of the estimate of 54.2 points. Eurozone Final Manufacturing PMI continues to rise, as the index hit 54.0 points, just above the estimate of 53.9 points. We’ll get a look at the Eurozone Services PMIs on Wednesday.

German releases have had a good run in January, but that came to a crashing halt on the last trading day of January. Retail Sales slid by 2.5%, its sharpest drop since October 2012. The markets had expected a weak gain of 0.2%. December releases have looked solid, led by Unemployment Change, Consumer Climate and Ifo Business Climate rose, indicating that German businesses and consumers are optimistic about the economy as we begin 2014. Will the Retail Sales release prove to be just a blip? Germany is the Eurozone’s largest economy, and the region will need the country to lead the way to an economic recovery on the continent.

Over in the US, Unemployment Claims disappointed, coming in above the estimate for the first time in four weeks. The key indicator rose to 348 thousand, up sharply from 326 thousand a week earlier. This was higher than the estimate of 331 thousand. The news was even worse from Pending Home Sales. The key indicator plunged 8.3%, its sharpest drop since April 2011. This will raise concerns about the health of the US housing sector, as Existing Home Sales and New Home Sales also missed their estimates in December. The silver lining was courtesy of Advanced GDP, which posted its best reading in two years, with a strong gain of 3.2% in Q4. This was just shy of the estimate of 3.3%, and a nice rise from the 2.8% gain in Q3. So where is the US economy headed? With GDP posting strong gains but employment numbers struggling, the recovery does not seem to be creating many new jobs, which could seriously hamper long-term economic growth.

In a highly anticipated decision last week, the Federal Reserve pressed the taper trigger for a second month in a row. This reduces its stimulus program (QE) by another $10 billion, reducing the bond-buying scheme to $65 billion each month. Fed chair Bernard Bernanke has indicated that the Fed plans to wind up QE by the end of the year, so we can expect further tapers, barring any surprise downturns in the US economy. Wednesday’s policy statement was Bernard Bernanke’s last hurrah, as Janet Yellen took over as Fed chair on February 1.

EUR/USD for Monday, February 3, 2014

EUR/USD February 3 at 9:50 GMT

EUR/USD 1.3500 H: 1.3505 L: 1.3478

EUR/USD Technical

• EUR/USD is trading quietly on Monday. The pair has edged higher in the European session.
• 1.3410 is providing support. This is followed by a support line at 1.3347.
• 1.3585 is the first line of resistance. This is followed by resistance at 1.3649.
• Current range: 1.3410 to 1.3585

Further levels in both directions:

• Below: 1.3410, 1.3347, 1.3267 and 1.3189
• Above: 1.3585, 1.3649, 1.3786, 1.3893 and 1.4000

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to movement towards long positions in Monday trading, continuing the trend we saw for most of last week.  This is not reflected in the pair’s current movement, as the euro has edged lower against the dollar. Short positions now have a slender majority, indicative of a slight trader bias towards the dollar continuing to gain ground against the euro.

The euro has steadied after losses on Friday. In the European session, EUR/USD has edged higher.

EUR/USD Fundamentals

• 8:15 Spanish Manufacturing PMI. Estimate 51.3 points. Actual 52.2 points.
• 8:45 Italian Manufacturing PMI. Estimate 54.2 points. Actual 53.1 points.
• 9:00 Eurozone Final Manufacturing PMI. Estimate 53.9 points. Actual 54.0 points.
• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:00 US Final Manufacturing PMI. Estimate 53.8 points.
• 15:00 US ISM Manufacturing PMI. Estimate 56.2 points.
• 15:00 US Construction Spending. Estimate 0.3%.
• 15:00 US ISM Manufacturing Prices. Estimate 54.2 points.
• All Day – Total Vehicle Sales. Estimate 15.6M.

*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.