EUR/USD – Euro Unchanged in Light Holiday Trade

As expected, EUR/USD is drifting in light trade on Thursday, as US markets are closed for the Thanksgiving holiday. In the European session, the euro is trading just above the 1.06 line, as the currency continues to struggle at its lowest levels since April. In the Eurozone, M3 Money Supply posted a gain of 5.3%, beating the estimate of 4.9%. Later in the day, Germany releases Consumer Climate, with the markets expecting a solid reading of 9.2 points.

The US released several key releases on Wednesday, to mixed reviews. Unemployment Claims plunged to 260 thousand, well off the estimate of 273 thousand. There was more good news from Core Durable Goods, which rebounded with a strong gain of 0.5%, matching the forecast. UoM Consumer Sentiment improved to 91.3 points, but the markets were overly optimistic, as the estimate stood at 93.2 points. This consumer confidence indicator comes on the heels of CB Consumer Confidence, which dropped to 90.4 points, nowhere close to the estimate of 99.3 points. These weak consumer confidence readings could raise concerns, as soft consumer confidence numbers could translate into weaker consumer spending, which is a key driver of economic growth.

Earlier this week, the ECB released its Financial Stability Report, which is published on a semi-annual basis. The report lauded the Eurozone financial system for its reliance in light of volatility in the financial markets in recent months, but expressed concern about risks due to the slowdown which has engulfed emerging markets. The report also mentioned that persistent low growth in the Eurozone could raise the risk of debt sustainability, which could hamper financial stability in the bloc. On Wednesday, the euro briefly slipped below the 1.06 line after a Reuters report that the ECB is considering further easing steps at its policy meeting next week. So the euro could be in for a rough ride ahead of the upcoming ECB and Federal Reserve policy meetings.

Eurozone inflation levels continue to point downward, as underlined by weak German inflation numbers last week. The ECB remains very concerned about deflation, as indicated in the minutes of its recent November policy meeting. The central bank has revised downwards its inflation outlook, and the markets are keeping a close eye on the next policy meeting on December 3. This will be a critical meeting, as the ECB could elect to cut rates or expand the current asset-purchasing program in order to combat deflation and try to breathe some life into the sluggish economy. Any of these steps will likely weigh on the struggling euro, which is trading at 7-month lows against a strong US dollar.

Will the Federal Reserve press the rate trigger at the December policy meeting? Last week’s Fed minutes did not confirm a December rate hike, but most analysts feel that the long-awaited move will indeed occur next month. The Fed hinted at a rate hike in its October policy statement, and the markets have been abuzz ever since. Last week, New York Fed President William Dudley said there is a “strong case” for a rate hike in December as long as economic data remains strong. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves would not cause unwanted turbulence on the global markets. One fly in the ointment is that of weak inflation levels, as the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. With the critical Fed meeting only a few weeks away, every key indicator and comment from a Fed member will be under close scrutiny from the markets.

EUR/USD Fundamentals

Thursday (Nov. 26)

• 9:00 Eurozone M3 Money Supply. Estimate 4.9%. Actual 5.3%
• 9:00 Eurozone Private Loans. Estimate 1.2%. Actual 1.2%
• 12:00 GfK German Consumer Climate. Estimate 9.2 points
• All Day – US Bank Holiday

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Thursday, November 26, 2015

EUR/USD November 26 at 11:35 GMT

EUR/USD 1.0610 H: 1.0627 L: 1.0600

EUR/USD Technical

• EUR/USD has showed marginal movement in the Asian and European sessions.
• 1.0659 is a weak resistance line.
• 1.0500 is providing support.
• Current range: 1.0500 to 1.0659

Further levels in both directions:

• Below: 1.05, 1.0359 and 1.0287
• Above: 1.0659, 1.0732, 1.0847 and 1.0941

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, reflecting the lack of movement from the pair. The ratio is close to an even split between long and short positions. This indicates slight trader bias towards the pair moving higher.

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.