EUR/USD has stabilized on Monday, after sharp losses late last week. In the European session, the pair is trading just below the 1.16 line. US markets are closed in celebration of Martin Luther King Day. In the Eurozone, Current Account slipped to EUR 18.1 billion, an 8-month low. This was well below the estimate of EUR 22.7 billion. Today’s other release is the Deutsche Bundesbank Monthly Report.
Currency markets were in turmoil on Thursday, as the Swiss National Bank abruptly abandoned its cap on the exchange rate between the euro and the franc, which had a floor of 1.20 for EUR/CHF. The cap had been in place since 2011, and the move marks a major policy reversal for the normally conservative Swiss central bank. Market reaction was swift, as the euro dropped some 15% against the franc, as the pair is currently trading at parity. The euro also slipped against the dollar on Thursday, losing about 160 points on the day.
Why the dramatic move by the Swiss? One reason is an attempt to fight deflation, which is hurting the Swiss economy. As well, with the euro losing value, the SNB has had to increase its euro purchases to keep EUR/CHF within the cap, and the SNB may have finally soured on the common currency. The stunning move indicates that the SNB believes that the ECB will implement quantitative easing at its policy meeting on Thursday and didn’t want to have to prop up the ailing common currency, which will likely lose ground after a QE move.
Thursday was a disappointing day for US releases. Employment numbers slipped on Thursday, as Unemployment Claims surprised with a reading of 316 thousand. This was well above the estimate of 299 thousand and was the highest reading since June 2014. However, the first full week of the year often shows a spike in claims, since holiday workers are dismissed, resulting in a higher number of claims. Elsewhere, PPI posted a decline of 0.3%, matching the forecast. Manufacturing data was mixed, as the Empire State Manufacturing Index rose to 10.3 points, while the Philly Fed Manufacturing Index slipped to 6.3 points, its worst showing in 11 months.
EUR/USD for Monday, January 19, 2015
EUR/USD January 19 at 12:05 GMT
EUR/USD 1.1596 H: 1.1628 L: 1.1552
- It’s been a quiet start to the week. EUR/USD has shown little movement in the Asian session. The pair has edged higher on in European trade.
- 1.1525 continues to provide strong support.
- On the upside, 1.1634 is a weak resistance line. 1.1734 is stronger.
- Current range: 1.1525 to 1.1634
Further levels in both directions:
- Below: 1.1525, 1.1426, 1.1340 and 1.1154
- Above: 1.1634, 1.1734, 1.1802, 1.1926 and 1.2042
OANDA’s Open Positions Ratio
EUR/USD is pointing to gains in short positions on Monday. This is not consistent with the pair’s movement, as the euro has posted small gains. The ratio currently has a majority of short positions, indicative of trader bias towards the euro resuming its losing ways.
- 9:00 Eurozone Current Account. Estimate 22.7B. Actual 18.1B.
- 11:00 German Buba Monthly Report.
*Key releases are highlighted in bold
*All release times are GMT
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