EUR/USD – Steady As Eurozone Industrial Production Slips

EUR/USD has edged higher to start the new trading week, as the pair trades in the mid-1.36 range early in Monday’s European session. The euro shrugged off weak Industrial Production releases out of Italy and France, as both posted declines. On Friday, US Non-Farm Payrolls disappointed, but the Unemployment Rate dropped. There are no US releases on Monday.

Eurozone Industrial Production looked weak in January. The French release posted a decline of 0.3%, shy of the estimate of -0.1%. This was the third decline in four readings, pointing to weak activity in the French manufacturing sector. Italian Industrial Production headed south after three straight gains, with a decline of 0.9%. The markets had expected a reading of 0.0%. We’ll need to see stronger economic data if the Eurozone economy is to improve.

On Friday, the markets were treated to another disappointing Nonfarm Payrolls release. The key employment indicator improved to 113 thousand, but this was well of the estimate of 185 thousand. The fact that the euro was unable to post gains against the dollar on Friday point to the high regard the markets have for the strength of the US economy. There was some good news as well on the employment front, as the Unemployment Rate dipped to 6.6%, its lowest level in over five years.

With the Eurozone affected by very weak inflation, the markets were waiting to see if the ECB would take any action last Thursday. With the benchmark interest rate at a record low level of 0.25%, clearly there isn’t much room to reduce rates, but there was talk of lowering deposit rates below zero. Such a move would likely hurt the euro due to investors dumping their euros in favor of other currencies. When this didn’t happen, the euro jumped, gaining about a cent after Draghi’s press conference. Draghi then reiterated what we’ve heard many times over, that for the foreseeable future interest rates will stay at their current levels or could dip even lower. What action, if any, the ECB takes when it sets rates in March will be heavily influenced by the inflation situation in the Eurozone. If inflation weakens further, the ECB will be under strong pressure to make a move, such as lowering deposit rates.

EUR/USD for Monday, February 10, 2014

EUR/USD February 10 at 11:20 GMT

EUR/USD 1.3629 H: 1.3651 L: 1.3618

EUR/USD Technical

• EUR/USD has edged higher on Monday. The pair touched a high of 1.3651 early in the European session
• 1.3585 has switched to a support role. The next support line is at 1.3410.
• 1.3649 is the first line of resistance. This is a weak line which could be tested during the day. There is stronger resistance at 1.3786.
• Current range: 1.3585 to 1.3649

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Monday. This is not reflected in the pair’s current movement, as the euro has edged higher against the dollar. Short positions enjoy a strong majority in the ratio, indicative of trader bias towards the dollar making inroads against the euro.

The euro is firm as we begin the new trading week. With no releases out of the US on Monday, the pair could remain quiet in the North American session.

EUR/USD Fundamentals

• 7:45 French Industrial Production. Estimate -0.1%. Actual -0.3%.
• 9:00 Italian Industrial Production. Estimate 0.0%. Actual -0.9%.
• 9:30 Eurozone Sentix Investor Confidence. Estimate 10.3 points. Actual 13.3 points.

*Key releases are highlighted in bold

*All release times are GMT

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