EUR/USD – Euro’s Rough Ride Likely to Continue in 2015

EUR/USD is listless on the final day of 2014, as the pair continues to trade in the mid-1.21 range. The euro finds itself at 2-year lows and has given up about 350 points in the past two weeks. Trade is light in the European session, as German markets are closed and there are no Eurozone events on Wednesday. In the US, Unemployment Claims will be released later today, along with Chicago PMI and Pending Home Sales.

The euro started 2014 in great shape, trading at 1.37 against the US dollar. However, EUR/USD tumbled about 11% this year, as the euro finds itself struggling at the 1.2150 mark as we head into 2015. This marks the euro’s biggest annual drop since 2005. The Eurozone’s woes have become a familiar broken record of low growth, rock bottom inflation and high unemployment. The ECB cut rates to the bone but this failed to kick-start the economy. The harsh economic reality engulfing the Eurozone means that ECB head Mario Draghi may be forced to use his strongest card, quantitative easing, early in 2015. This step would further weaken the wobbly euro, and analysts are forecasting that the currency will dip below the 1.20 level in the first quarter of 2015.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. On Tuesday, CB Consumer Confidence rose to 92.6 points, up from 88.8 a month earlier. Although this missed the estimate of 94.6, this was a solid reading which follows last week’s UoM Consumer Sentiment report. That indicator has been on an upward swing and hit 93.6 points in December, its highest level since February 2007. Consumer confidence numbers are closely watched, as increased confidence should translate into more spending by consumers, creating more jobs and strengthening economic activity.

Greece was in the spotlight on Monday, but this time it was a political crisis rather than trouble with the country’s bailout plan. Greece lawmakers failed to elect a new president for a third time, leaving Prime Minister no choice but to dissolve parliament. A general election is likely to take place at the end of January. The country’s controversial bailout agreement promises to be a major election issue. The bailout agreement ends in February, and Greece owes EUR 260 billion to the troika (EU, ECB and the IMF). Negotiations between Greece and the troika are on hold until after the election. The bailout agreement forced Greece to implement stiff austerity measures which have proven deeply unpopular, and the Syriza Party, which leads in the polls, wants to cancel the bailout agreement and write off much of the country’s debt. Such a move could send shock waves across European markets, as other bailout countries such as Ireland would be tempted to follow Greece’s precedent and opt out of their financial obligations to the troika. The latest Greek saga will be closely watched by the markets as we move closer to Greek election day.

EUR/USD for Wednesday, December 31, 2014

EUR/USD December 31 at 10:15 GMT

EUR/USD 1.2152 H: 1.2170 L: 1.2144

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1926 1.2042 1.2143 1.2286 1.2407 1.2518

 

  • EUR/USD is almost unchanged in the Asian and European sessions. The pair continues to put pressure on support at 1.2143.
  • 1.2143 remains a weak support level. Will it break in the North American session? 1.2042 is next.
  • 1.2286 remains a strong resistance line.
  • Current range: 1.2143 to 1.2286

Further levels in both directions:

  • Below: 1.2143, 1.2042, 119.26 and 118.02
  • Above: 1.2286, 1.2407, 1.2518, 1.2688 and 1.2806

 

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Wednesday. This is consistent with the lack of movement shown by EUR/USD. The ratio has a majority of long positions, indicative of trader bias towards the euro moving to higher ground.

EUR/USD Fundamentals

  • 13:30 US Unemployment Claims. Estimate 287K.
  • 14:45 US Chicago PMI. Estimate 60.2 points.
  • 15:00 US Pending Home Sales. Estimate 0.6%.
  • 15:30 US Crude Oil Inventories. Estimate 0.2M.
  • 17:00 US Natural Gas Storage. Estimate -37B.

*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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.