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EUR/USD – Euro Improves On Spanish and Eurozone Data

EUR/USD has posted gains on Tuesday, as the pair has pushed above the 1.39 line in the European session. On the release front, Spanish releases were excellent, as Unemployment Change plunged and Manufacturing PMI hit a ten-year high. Eurozone Retail Sales posted a gain in April and beat the estimate. In the US, Tuesday’s highlight is Trade Balance.

The euro continues to post gains, and took advantage of strong Spanish numbers on Tuesday. Unemployment Change dropped by 111.6 thousand, crushing the estimate of -49.1 thousand. Unemployment tends to improve in the busy tourist season, but this plunge was clearly much sharper than the markets had anticipated. Spanish Services PMI continues to improve, and the reading of 56.5 marked its highest level since March 2007. The estimate stood at 54.3 points. Meanwhile, Eurozone Retail Sales edged lower to 0.3%, but this was well above the estimate of -0.2%.

Inflation, or rather the lack of, continues to weigh on the Eurozone. PPI posted its third straight decline in April, coming in at -0.2%. Last week, German Preliminary CPI did no better, dipping to -0.2%. The ECB finds itself under pressure to take action but so far has balked. ECB head Mario Draghi has stated that negative deposit rates or even QE are on the table, but the markets have heard this often before and these remarks have not had much effect, as the euro remains at high levels against the US dollar. However, with EUR/USD fast approaching the 1.40 line, we are likely to hear tougher rhetoric from the ECB about the high value of the euro.

US employment releases looked excellent on Friday. Nonfarm Payrolls jumped to 288 thousand, easily beating the estimate of 216 thousand. The Unemployment Rate kept pace, dropping to 6.3%, its lowest level since September 2008. At the same time, the participation rate in the labor force dropped, so slack remains in the US job market, despite the strong releases in April.

As expected, the Federal Reserve trimmed its QE program by $10 billion last week. This marks the fourth cut since December, reducing the asset purchase scheme to $45 billion/month. The tapers are no longer creating headlines as they did just a few months ago, and the dollar didn’t get any lift against its major rivals. What interested the markets more was the Fed statement that interest rates would remain low for a “considerable time” after QE ends [1]. The markets expect QE to wind up before the end of the year, so we could see a rate hike in early 2015, depending of course, on the strength of the US economy and the job market.


EUR/USD for Tuesday, May 6, 2014

Forex Rate Graph 21/1/13

EUR/USD May 6 at 9:15 GMT

EUR/USD 1.3925 H: 1.3931 L: 1.3873


EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3649 1.3786 1.3893 1.4000 1.4149 1.4307


Further levels in both directions:


OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions in Tuesday trading. This is not consistent with the pair’s movement, as the euro has posted gains. The ratio is made up of a majority of short positions, indicative of the dollar reversing positions and moving upwards.

EUR/USD has posted gains in the European session, as the pair trades above the 1.39 line.


EUR/USD Fundamentals

*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.

Kenny Fisher

Kenny Fisher [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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