EUR/USD: Limited Movement as Eurozone CPI Matches Forecast

EUR/USD is showing little movement on Thursday. In the European session, the pair is trading in the mid-1.35 range. On the release front, Eurozone CPI remained unchanged at 0.5%, matching expectations. In the US, it’s a busy day with three key events, Building Permits, Unemployment Claims and the Philly Fed Manufacturing Index.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed’s asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

Eurozone CPI, the primary gauge of consumer spending, remained unchanged in June, posting a gain of 0.5%. This matched the estimate, and EUR/USD did not react to the reading. Core CPI, which excludes volatile items, looked even better, climbing 0.8%. This also matched the forecast. Meanwhile, German ZEW Economic Sentiment, a highly regarded survey of institutional investors and analysts slipped to 27.1 points, short of the estimate of 28.9 points. The indicator has been falling steadily since last November, when it was above the 60-point level. The June figure is the weakest we’ve seen since November 2012. Eurozone ZEW Economic Sentiment brought no relief, as it plunged to 48.1 points, down from 58.4 a month earlier. The estimate stood at 62.3 points. These weak numbers have further raised concerns about the health of the German and Eurozone economies, and the euro could lose more ground.

Recent US inflation numbers have been weak, so the markets were pleasantly surprised with the June release of the Producer Price index, the primary gauge of inflation in the manufacturing sector. The index improved to 0.4%, beating the estimate of.0.2%. Core PPI, which excludes volatile items, posted a weak gain of 0.2%, matching the estimate. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, stronger inflation numbers such as the June PPI will put more pressure on the Fed to raise rates.

EUR/USD for Thursday, July 17, 2014

EUR/USD July 17 at 9:40 GMT

EUR/USD 1.3534 H: 1.3539 L: 1.3521

EUR/USD Technical

• EUR/USD is showing little change in the Asian and European sessions.
• 1.3487 is providing support. 1.3346 is stronger.
• 1.3585 is the next resistance line. 1.3651 follows.
• Current range: 1.3487 to 1.3585

Further levels in both directions:

• Below: 1.3487, 1.3346, 1.3295 and 1.3175
• Above: 1.3585, 1.3651, 1.3786 and 1.3870

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Thursday, continuing the trend seen a day earlier. This is consistent with the movement of the pair, as the euro has posted small gains. The ratio currently has switched to a majority of long positions, indicative of a change in trader bias, which is now in favor of the euro moving to higher ground.

EUR/USD Fundamentals

• 8:43 Spanish 10-year Bond Auction. Actual 2.09%.
• 9:00 Eurozone CPI. Estimate 0.5%. Actual 0.5%.
• 9:00 Eurozone Core CPI. Estimate 0.8%. Actual 0.8%.
• 12:30 US Building Permits. Estimate 1.04M.
• 12:30 US Unemployment Claims. Estimate 310K.
• 12:30 US Housing Starts. Estimate 1.02M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 15.6 points.
• 14:30 US Natural Gas Storage. Estimate 99B.

*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.