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EUR/USD – Euro Dips on Weak Eurozone, German Manufacturing PMIs

The euro has started the trading week with losses, as the pair trades at the 1.1060 in the European session. On the release front, German and Eurozone Manufacturing PMIs missed their estimates. In the US, there is only one event on the schedule, Manufacturing PMI. On Tuesday, there are two key releases – German Ifo Business Climate and US CB Consumer Confidence.

German PPI, which measure inflation in the manufacturing sector, looked dismal in January, with a decline of 0.7%. This was shy of the estimate of -0.3%. So it comes as no surprise that German Flash Manufacturing PMI also missed expectations, with a reading of 50.2 points, barely above the 50-line, which separates contraction and expansion. Eurozone Flash Manufacturing PMI was a bit better at 51.0 points, but also missed the estimate. Eurozone’s manufacturing sector has been hit hard by the Chinese slowdown, as the Asian giant is the Eurozone’s second largest trading partner. These weak readings are making it increasingly difficult for the ECB to remain on the sidelines as the Eurozone economy continues to struggle. Will Mario Draghi and Co. make a move at the March policy meeting? Possible monetary moves include adopting negative interest rates (a step recently taken by the BoJ) as well as increasing the current quantitative easing scheme, which currently involves purchasing assets at 60 billion euros/mth. Either of these moves would likely shake up the currency markets and weaken the euro.

The Federal Reserve sent out a cautious message in last week’s minutes, which reiterated the central bank’s concern that turmoil in global markets could have negative repercussions for the US economy. Policymakers sent out a broad hint that a rate hike is unlikely in March, as they discussed “altering their earlier views of the appropriate path for the target range for the federal funds rate”. This could have a negative impact on the US dollar, as investors may look elsewhere to park funds if US rates are not moving higher anytime soon. Federal Reserve chair Janet Yellen said last week that the Fed still planned to raise rates later in 2016, but FOMC member James Bullard argued that there was room to delay any rate moves, given global financial turmoil and weak US inflation [1]. Still, a growing number of market players are skeptical that the Fed will make any moves before next year. Back in the heady days of December, the Fed hinted at a series of rate hikes during 2016, but the turmoil in the financial markets and the downturn in the US economy in 2016 have quickly dampened expectations of a rate move.

Monday (Feb. 22)

Upcoming Key Events

Tuesday (Feb. 23)

*Key events are in bold

*All release times are EST

EUR/USD for Monday, February 22, 2016

EUR/USD February 22 at 6:00 EST

Open: 1.1122 Low: 1.1055 High: 1.1123 Close: 1.1063

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0847 1.0941 1.1087 1.1172 1.1278 1.1349

Further levels in both directions:

OANDA’s Open Positions Ratio

EUR/USD ratio has shown slight movement towards short positions, which retain a strong majority of positions (55%). This points to trader bias towards the euro continuing to move downwards.

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 [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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