EUR/USD – Rangebound Ahead of ECB Meeting

EUR/USD is listless on Thursday, as the pair trades in the mid-1.37 range in the European session. On the release front, Services PMIs out of the Eurozone were a mix. Eurozone Retail Sales posted a gain in February, its third in four releases. Later in the day, the ECB will announce its new interest rate, followed by a press conference with ECB head Mario Draghi. In the US, there are three key events on the schedule – Unemployment Claims, Trade Balance and the ISM Non-manufacturing PMI.

The markets are eagerly awaiting the ECB rate decision. With the Eurozone weighed down by with persistently low inflation and the euro continuing to trade at high levels, the ECB is under pressure to take action. Last week, German Bundesbank head Jens Weidmann gave support to negative deposit rates 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. International Monetary Fund chief Christine Lagarde has urged the ECB to urged the central bank to take steps to raise inflation. However, ECB head Mario Draghi has tried to downplay the inflation issue, and any concrete moves by the ECB on Thursday would be a surprise and could move the currency markets.

Spanish Unemployment Change is notorious for its sharp fluctuations, resulting in market forecasts that are often well off the mark. The March release was no exception, as the reading of -16.6 thousand was much better than the estimate of -5.3 thousand. The indicator has rolled off four declines in the past five releases, which points to some improvement in the Spanish economy. Spanish Manufacturing PMI rose slightly to 54.4 points, meeting expectations. The index continues to point to expansion in the services sector, with reading above the 50-point level.

Earlier this the week, Fed chair Janet Yellen said that inflation and employment levels needed to improve considerably, and the Federal Reserve would continue to provide monetary stimulus for some time. 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 impress. On Tuesday, Retail Sales posted a strong gain of 1.3%, cruising past the estimate of -0.5%. 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.

EUR/USD for Thursday, April 3, 2014

EUR/USD April 3 at 9:00 GMT

EUR/USD 1.3762 H: 1.3773 L: 1.3755

EUR/USD Technical

• EUR/USD is showing little activity on Thursday.
• 1.3649 is providing strong support.
• 1.3786 has reverted to a resistance line and continues to be fluid. This is followed by a strong line at 1.3893, which is protecting the 1.39 level.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio has posted gains in long positions on Thursday, reversing the direction seen a day earlier. This is not consistent with the pair’s current movement, as the pair shows little movement. Short positions retain a strong majority, indicative of trader bias towards the dollar posting gains at the expense of the euro.

EUR/USD is showing little movement in the European session. With the US releasing Unemployment Claims later in the day, we could see a breakout by the pair during the North American session.

EUR/USD Fundamentals

• 7:15 Spanish Services PMI. Estimate 54.1 points. Actual 54.0 points.
• 7:45 Italian Services PMI. Estimate 52.3 points. Actual 49.5 points.
• 8:00 Eurozone Final Services PMI. Estimate 52.4 points. Actual 52.2 points.
• 8:42 Spanish 10-year Bond Auction. Actual 3.29%.
• 9:00 Eurozone Retail Sales. Estimate -0.3%. Actual 0.4%.
• 9:02 French 10-year Bond Auction 2.15%.
• 11:30 US Challenger Job Cuts.
• 11:45 ECB Minimum Bid Rate. Estimate 0.25%.
• 12:30 ECB Press Conference.
• 12:30 US Trade Balance. Estimate -38.3B.
• 12:30 US Unemployment Claims. Estimate 319K.
• 13:45 US Final Services PMI. Estimate 55.5 points.
• 14:00 US ISM Non-Manufacturing PMI. Estimate 53.5 points.
• 14:00 ECB President Mario Draghi Speaks.
• 14:30 US Natural Gas Storage. Estimate -74B.

*Key releases are highlighted in bold

*All release times are GMT

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