EUR/USD – Euro Ends Dismal 2014 at 1.21

EUR/USD wrapped up 2014 on a sour note, edging below the 1.21 line at the end of trade on Wednesday. The euro continues to struggle and starts the New Year at its lowest level against the dollar since July 2012. Markets in the Eurozone and the US are closed on Thursday for New Year’s, but will resume action on Friday, highlighted by German Manufacturing PMI and US ISM Manufacturing PMI.

The euro began 2014 in great shape, trading at 1.37 against the US dollar. However, EUR/USD tumbled over the course of the year, as the euro finds itself at the 1.21 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 a record low of 0.05% 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 trump 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.

US releases wrapped up 2014 with mixed results. Unemployment Claims surprised with a sharp rise, coming in at 298 thousand, compared with 280 thousand in the previous reading. The estimate stood at 287 thousand. On the housing front, Pending Home Sales bounced back from a decline in the previous reading, posting a gain of 0.8% in December. This beat the forecast of 0.6%. The news was not as good from Chicago PMI, which dropped to 58.3 points, its worst showing since June. The reading fell short of the estimate of 60.2 points.

With the US economy showing better numbers as we head into 2015, the US consumer is showing more optimism about the economy. Earlier in the week, 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.

EUR/USD for Thursday, January 1, 2015

EUR/USD Technical

• EUR/USD broke below resistance at 1.2143 on Wednesday.
• 1.2042 is an immediate support level.
• 1.2143 is a weak resistance line. 1.2286 is stronger.
• Current range: 1.2042 to 1.2143

Further levels in both directions:

• Below: 1.2042, 119.26, 118.02 and 1.1638
• Above: 1.2143, 1.2286, 1.2407, 1.2518 and 1.2688

OANDA’s Open Positions Ratio

EUR/USD ratio has a majority of long positions, indicative of trader bias towards the euro reversing direction and moving to higher ground.

EUR/USD Fundamentals

• There are no Eurozone or US releases on Thursday.

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.