EUR/USD – Steady Ahead of ECB Rate Statement

EUR/USD is stable on Thursday, as the pair trades just above the 1.25 line in the European session. On the release front, German Factory Orders posted a gain of 0.8%, well below expectations. Later in the day, the ECB will release a rate statement, followed by a Mario Draghi press conference. In the US, today’s highlight is Unemployment Claims, with the markets anticipating another strong reading. The estimate stands at 287 thousand, little changed from the previous release.

There hasn’t been much for Mario Draghi and his ECB colleagues to cheer about lately, so it will be interesting to see what the ECB plans to serve later today. The record-low interest rate of 0.05% is unlikely to change, but Draghi’s press conferences are unpredictable. If the ECB head surprises the markets with hints about further stimulus, the euro could lose ground. With the Eurozone mired in low growth, weak inflation and high unemployment, the ECB is under pressure to take more action, as interest rate cuts have not improved the economic situation. There has been talk that the ECB could borrow a page from other central banks and implement an asset-purchase program (QE) to kick-start the struggling economy. The US Federal Reserve terminated an extensive QE program earlier in October, marking a strong vote of confidence in the health of the US economy.

The EU released its Economic Forecasts on Tuesday, which provides an economic projection for Eurozone members for the next two years. EU Vice President Jyrki Katainen said that the economic and employment situation is “not improving fast enough” in the zone, which continues to struggle with very weak growth and high unemployment. The EU noted that growth is expected to reach just 0.8%, growth this year, and heavyweights Germany and France are expected to post weak growth for 2014.

Eurozone and Spanish Services PMI were almost unchanged from last month and met expectations. The Italian release improved to 50.8, pointing to expansion in the services industry for the first time in three months. The news was not as positive from Retail Sales, which came in at -1.3%, much worse than the estimate of -0.6%. This marked the indicator’s sharpest decline since January. Consumer spending is a key component of economic growth, and is one more indication of the poor state of the Eurozone economy. German data on Thursday didn’t offer much relief, as Factory Orders posted a gain of 0.8%, well of the estimate of 2.2%.

Over in the US, job numbers have been solid in recent readings, and the trend continued on Wednesday with an excellent performance from ADP Nonfarm Payrolls. The key indicator climbed to 230 thousand, easily beating the estimate of 214 thousand. This marked the indicator’s strongest showing in 2014. We’ll get a look at Unemployment Claims later in the day, and the official Nonfarm Payrolls on Friday.

EUR/USD for Thursday, November 6, 2014

EUR/USD November 6  8:55 GMT

EUR/USD 1.2510 H: 1.2530 L: 1.2473

EUR/USD Technical

• EUR/USD posted strong gains in the Asian session and tested resistance at 1.2518. The pair has reversed directions and given up some of these gains.
• On the upside, 1.2518 continues to be active and was briefly breached earlier in the day. It remains a weak line. 1.2688 is stronger.
• 1.2407 is providing strong support.
• Current range: 1.2407 to 1.2518

Further levels in both directions:

• Below: 1.2407, 1.2286, 1.2143 and 1.2042
• Above: 1.2518, 1.2688, 1.2806, 1.2905 and 1.2984

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Thursday, a trend which has characterized the pair throughout the week. This is consistent with the limited movement we’re seeing from the pair. The ratio has a majority of long positions, indicative of trader bias towards the euro breaking out of range and moving higher.

EUR/USD Fundamentals

• 7:00 German Factory Orders. Estimate 2.2%. Actual 0.8%.
• 9:10 Eurozone Retail PMI.
• All Day – Eurogroup Meetings.
• Tentative – Spanish 10-year Bond Auction.
• Tentative – French 10-year Bond Auction.
• 12:30 US Challenger Job Cuts.
• 12:45 ECB Minimum Bid Rate. Estimate 0.05%.
• 13:30 ECB Press Conference.
• 13:30 US Unemployment Claims. Estimate 285K.
• 13:30 US Preliminary Nonfarm Productivity. Estimate 0.9%.
• 13:30 US Preliminary Unit Labor Costs. Estimate 1.0%.
• 15:30 US Natural Gas Storage. Estimate 86B.
• 18:30 US FOMC Member Jerome Powell Speaks.

*Key releases are highlighted in bold.

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