EUR/USD – Little Movement on Weak Euro PMIs

EUR/USD continues to show limited movement this week, as the pair trades in the mid-1.28 range in the Tuesday European session. Taking a look at today’s key events, Eurozone PMIs painted a mixed picture, as is often the case. French Manufacturing PMI improved to 48.8 points, while German Manufacturing PMI dipped to 50.3 points. There are no major releases out of the US, but the markets will be keeping an eye on the Richmond Manufacturing Index. The indicator is expected to post another strong reading.

There is increasing talk about the dire straits of the Eurozone economy, which is struggling with low growth levels. Monday’s Euro PMIs appear to underscore these concerns, pointing to weaker activity in the services and manufacturing sectors. French Manufacturing PMI, a key release, improved to 48.6 points, but this still points to contraction (the 50-point level separates between contraction and expansion). German Manufacturing PMI, also a major indicator, slipped to 50.3 points, well shy of the estimate of 51.3 points. German Services PMI and the Eurozone Manufacturing and Services PMIs also lost ground in August.

Eurozone inflation numbers continue to float at anemic levels. On Friday, German PPI posted a decline of -0.1%, unchanged from the previous reading. The index has not managed a gain in 2014. Meanwhile, in an effort to combat deflation in the Eurozone, the ECB announced the results of its first TLTRO on Thursday. This lending program aims to bolster the economy by increasing bank lending to the real economy. The ECB said that the take-up by European banks amounted to 82.3 billion euros, which was well short of estimates that ranged from 100-300 billion. Still, it’s too early to declare the program a failure, and traders and investors will have to wait till the next TLTRO in December before reaching conclusions as to the scheme’s success.

US Existing Home Sales didn’t impress in August, slipping to 5.05 million, compared to 5.15 million in the previous release. This was way off the estimate of 5.21 million. The indicator had exceeded the estimate in the past three releases, so the weak numbers disappointed the markets. We’ll get a look at New Home Sales on Wednesday.

The US economy may be much more robust than that of the Eurozone, but it is also grappling with weak inflation levels. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation levels could delay the Federal Reserve’s plan to raise interest rates, which is widely expected to take place in the first half of 2015.

EUR/USD for Tuesday, September 23, 2014

EUR/USD September 23 at 8:30 GMT

EUR/USD 1.2869 H: 1.2874 L: 1.2843

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has edged upwards in the European session.
• 1.2806 is an immediate support level. It has remained firm since July 2013.
• 1.2905 is the next resistance line. 1.2984 is stronger.
• Current range: 1.2806 to 1.2905

Further levels in both directions:

• Below: 1.2806, 1.2688 and 1.2518 and 1.2353
• Above: 1.2905, 1.2984, 1.3104, 1.3175 and 1.3288

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Tuesday. This is consistent with the movement of the pair, as movement has been limited. The ratio has a majority of long positions, indicative of trader bias towards the euro moving upwards.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Estimate 47.1 points. Actual 48.8 points.
• 7:00 French Flash Services PMI. Estimate 50.2 points. Actual 49.4 points.
• 7:30 German Flash Manufacturing PMI. Estimate 51.3 points. Actual 50.3 points.
• 7:30 German Flash Services PMI. Estimate 54.6 points. Actual 55.4 points.
• 8:00 Eurozone Flash Manufacturing PMI. Estimate 50.6 points. Actual 50.5 points.
• 8:00 Eurozone Flash Services PMI. Estimate 53.2 points. Actual 52.8 points.
• 13:00 US HPI. Estimate 0.4%.
• 13:20 US FOMC Member Jerome Powell Speaks.
• 13:45 US Flash Manufacturing PMI. Estimate 58.1 points.
• 14:00 US Richmond Manufacturing Index. Estimate 10 points.
• 18:00 US FOMC Member Narayana Kocherlakota Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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