EUR/USD – Slumping Euro Dips Below 1.29

The euro is stable but under pressure on Tuesday, as EUR/USD has dropped below the 1.29 level for the first time since July 2013. It’s another quiet day on the release front, with no major events in the Eurozone. In the US, today’s highlight is JOLTS Jobs Openings. The employment indicator has improved over three consecutive releases, and the upward swing is expected to continue, with an estimate of 4.72M.

US numbers continue to point to a deepening recovery, but the labor market is showing some signs of trouble. On Friday, the eagerly-anticipated Nonfarm Employment Change crashed to 142 thousand, its lowest gain since January. This surprised the markets, which had expected a gain of 226 thousand. The disappointing release follows a weak ADP Nonfarm Payrolls report as well as a rise in unemployment claims. The markets are hoping for some relief from JOLTS Jobs Openings, which is expected to improve in the August release.

Elsewhere in the US, there was positive news from last month’s services and manufacturing PMIs. ISM Non-Manufacturing PMI continued its impressive climb, hitting 59.6 points, well above the estimate of 57.3. ISM Manufacturing PMI climbed to 59.0 points, beating the forecast of 57.0 points. The impressive readings from the manufacturing and services sectors point to a balanced economic recovery. If US numbers continue to point upwards, we could see an interest rate hike in the early part of 2015.

German Trade Balance started off the week in fine fashion, as the trade surplus climbed to EUR 22.2 billion, up from 16.2 billion a month earlier. This easily beat the estimate of 17.3 billion. The strong figure follows impressive German manufacturing data last week. Industrial Production gained 1.9%, its strongest showing in 2014. This handily beat the estimate of 0.5%. Factory Orders sparkled with a 4.6% last month, its highest gain since November 2011. This easily beat the estimate of 1.6%, and follows two straight declines.

Dramatic and unexpected monetary action by the ECB on Thursday sent the euro reeling below the 1.30 level. The markets had not expected any change to interest rates, but the ECB took the axe for the second time in three months, cutting the benchmark rate to a record low of 0.05%, down from 0.15%. As well, the deposit facility rate was lowered to -0.20% from -0.10% and the marginal lending rate dropped to 0.30% from 0.40%. ECB head Mario Draghi had more in store, saying that the central bank plans to implement an asset purchase program (QE). No details of a QE scheme were provided, but the ECB said it would release details in October. The interest rate cuts and QE scheme are intended to bolster anemic growth in the Eurozone and combat the growing threat of deflation. Draghi is using everything he can lay his hands on in the ECB toolbox, and time will tell if the latest measures have a positive effect on the stumbling Eurozone economy.

EUR/USD for Tuesday, September 9, 2014

EUR/USD September 9 at 10:55 GMT

EUR/USD 1.2890 H: 1.2890 L: 1.2859

EUR/USD Technical

• EUR/USD is showing little activity in the Asian and European sessions. The pair touched a low of 1.2858 early in the European session.
• 1.2905 has switched to a resistance role as the euro has slipped below the 1.29 line. 1.2984 is stronger.
• 1.2806 is the next support level.
• Current range: 1.2806 to 1.2905

Further levels in both directions:

• Below: 1.2806, 1.2688, 1.2518 and 1.2853
• Above: 1.2905, 1.2984, 1.3104 and 1.3175

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Tuesday. This is consistent with the movement we are seeing from EUR/USD, as the euro has posted small losses. The ratio has a majority of long positions, but the percentage of short positions continues to increase. If this trend continues, we could see an even split between short and long positions sometime in September.

EUR/USD Fundamentals

• 6:45 French Government Budget Balance. Actual -84.1B.
• 6:45 French Trade Balance. Estimate -5.0B. Actual -5.5B.
• 11:30 US NFIB Small Business Index. Estimate 95.9 points.
• 14:00 US JOLTS Job Openings. Estimate 4.72M.
• 14:00 US FOMC Daniel Tarullo Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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