EUR/USD: Euro Dips on Gaza, Ukraine Tensions

EUR/USD has lost ground on Tuesday, as the pair trades below the low-1.35 line in the European session. Continuing violence in Gaza and Ukraine has lent support to the safe-haven US dollar. On the release front, it’s a busy day in the US, highlighted by Core CPI and Existing Home Sales. There are no Eurozone events on the schedule.

International trouble spots continue to grab the headlines, as nervous investors keep an eye on events Ukraine and the Middle East. Last week’s downing of a Malaysian Airlines jet, apparently by pro-Russian separatists, has seriously frayed relations between Europe and the US with Russia, which have already been strained since the latter annexed Crimea. Fighting continues between the separatists and Ukrainian forces in Eastern Ukraine. The Europeans are threatening stronger sanctions against Russia, and escalating tensions within Europe does not bode well for the euro. In the Middle East, the fighting in Gaza between Hamas and Israel has intensified, as Israel presses on with a land offensive. Meanwhile, the international community is intensifying efforts to try to get the two sides to agree to a cease fire.

On Friday, US Consumer Sentiment remained steady at 81.3 points, but this was well below the estimate of 83.5 points. A day earlier, Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, improving employment data will put more pressure on the Fed to raise rates.

Try as it might, the ECB can’t seem to coax much inflation out of the Eurozone economy. Eurozone CPI, the primary gauge of consumer inflation, remained unchanged in June, posting a gain of 0.5%. This is well below the central bank’s target of 2%. Germany, the Eurozone’s largest economy, is also suffering from weak inflation. PPI came in at a flat 0.0%, and the manufacturing inflation index has failed to post a gain in 2014. Faced with weak inflation and growth levels in the Eurozone, the ECB will be under pressure to take some action at its August policy meeting.

EUR/USD for Tuesday, July 22, 2014

EUR/USD July 22 at 9:15 GMT

EUR/USD 1.3489 H: 1.3530 L: 1.3481

EUR/USD Technical

• EUR/USD lost ground late in the Asian session and continues to fall in European trading.
• On the downside, 1.3487 is under strong pressure and was breached earlier. 1.3346 is stronger.
• On the upside, 1.3585 has some breathing room as the euro has lost ground.
• 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 almost unchanged on Tuesday, continuing the trend which has marked the ratio since last week. This is not consistent with the movement shown by the pair, as the euro has posted moderate losses. The ratio has a majority of long positions, indicative of trader bias towards the euro reversing its downward movement.

EUR/USD Fundamentals

• 12:30 US Core CPI. Estimate 0.2%.
• 12:30 US CPI. Estimate 0.3%.
• 13:00 US HPI. Estimate 0.4%.
• 14:00 US Existing Home Sales. Estimate 4.98M.
• 14:00 US Richmond Manufacturing Index. Estimate 5 points.

*Key releases are highlighted in bold

*All release times are GMT

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