EUR/USD – Slight Gains As Eurozone, German Numbers Improve

EUR/USD has posted modest gains on Tuesday, as the pair trades just shy of the 1.38 line in the European session. In economic news, Federal Reserve chair Janet Yellen surprised the markets when she said that the US economy would require monetary stimulus for some time. It’s a busy day in the Eurozone. PMI releases met expectations, while German Unemployment Claims beat the estimate for a fourth straight time. There was more good news, as the Eurozone Unemployment Rate dropped below the 12.0% rate for the first time since February 2013. Today’s highlight in the US is ISM Manufacturing PMI.

On Monday, Fed chair Janet Yellen said that “considerable slack” remained in the US economy and this would require further stimulus measures. Currently, the Fed is purchasing $55 billion in assets under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that it has no plans to raise interest rates until sometime in 2015.

German data continues to look solid. German Unemployment Change continues to show improvement, as the indicator dropped to -12 thousand, down from -14 thousand a month earlier. German Consumer Climate and Business Climate also looked sharp in February, pointing to stronger confidence in the German economy, the largest in the Eurozone.

With the Eurozone struggling with weak inflation and the euro continuing to trade at high levels, the ECB is openly considering QE and negative rates. Last week, German Bundesbank head Jens Weidmann gave support to a negative deposit rate in order to respond to the strong euro. He also raised the possibility of a QE scheme for the ECB, whereby the central bank would purchase loans or other assets in order to fight deflation, which remains a serious concern. Mario Draghi also spoke on the issue, saying that the ECB is ready to act if inflation slips further.

EUR/USD for Tuesday, April 1, 2014

EUR/USD April 1 at 10:05 GMT

EUR/USD 1.3795 H: 1.3802 L: 1.3669

EUR/USD Technical

• EUR/USD was quiet in the Asian session, but has edged higher in European trading.
• 1.3786 is providing support. This is a weak line and could be tested during the day.
• There is strong resistance at 1.3893, which is protecting the 1.39 line.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

• Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio has posted gains in short positions on Tuesday, continuing the trend we saw at the start of the week. This is not consistent with the pair’s current movement, as the euro has posted small gains. Short positions retain a strong majority, indicative of trader bias towards the dollar posting gains at the expense of the euro.

The euro has edged higher in the European session and is trading just below the 1.38 line.

EUR/USD Fundamentals

• 7:15 Spanish Manufacturing PMI. Estimate 52.9 points. actual 52.8 points.
• 7:45 Italian Manufacturing PMI. Estimate 52.2 points. Actual 52.4 points.
• 7:55 German Unemployment Change. Estimate -9K. Actual -12K.
• 8:00 Eurozone Final Manufacturing PMI. Estimate 53.0 points. Actual 53.0 points.
• 8:00 Italian Monthly Unemployment Rate. Exp. 12.9%. Actual 13.0%.
• 9:00 Eurozone Unemployment Rate. Estimate 12.0%. Actual 11.9%.
• Day 1 – ECOFIN Meetings.
• 13:45 US Final Manufacturing PMI. Estimate 55.9 points.
• 14:00 US ISM Manufacturing PMI. Estimate 54.2 points.
• 14:00 US Construction Spending. Estimate 0.2%.
• 14:00 US IBD/TIPP Economic Optimism. Estimate 46.3 points.
• 14:00 US ISM Manufacturing Prices. Estimate 59.2 points.
• All Day – US Total Vehicle Sales. Estimate 15.8M.

*Key releases are highlighted in bold

*All release times are GMT

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