EUR/USD – Euro Unchanged as German, French Markets Closed

EUR/USD is unchanged on Monday, as the euro trades slightly above 1.1322. There are no Eurozone releases on the schedule, and German and French markets are closed for a bank holiday. In the US, it’s a quiet start to the week, highlighted by the Empire State Manufacturing Index. The index is expected to climb to 7.2 points. On Tuesday, the US releases Building Permits and CPI, the primary gauge of consume spending.

The euro remains under pressure, as the currency dipped over 100 points late last week. On Friday, Eurozone and Germany GDP reports were released for the first quarter, and both indicators posted respectable gains. Germany’s economy expanded 0.7%, above the forecast of 0.6%. Eurozone Flash GDP gained 0.5%, shy of the estimate of 0.6%. Despite some growth, the Eurozone remains stuck with very low inflation levels. German Final CPI declined 0.4% in April, compared to a gain of 0.8% a month earlier. Will the euro continue to lose ground? The well-respected Deutsche Bank has raised its forecast for EUR/USD to 1.05 in 2016. Analysts at the bank had previously projected that the euro would drop below parity in 2016, but are now doubtful that the ECB has the monetary ammunition to curb the euro. As well, the analysts wrote that there is a lower likelihood that the Federal Reserve will raise rates.

The Eurozone manufacturing sector continues to struggle, as the soft global economy has meant less demand for European products. Eurozone Industrial Production declined 0.8% in April, compared to a forecast of -0.2%. The indicator is in trouble, as this marked the third decline in four months. Earlier in the week, German Industrial Production was dismal, posting a decline of 1.3%, which well off the forecast of -0.2%. This marked the fourth decline in the past five readings. The markets had hoped for better news after German Factory Orders surprised with a strong gain.

The US wrapped up the week on a positive note, highlighted by solid retail sales and consumer confidence reports. Core Retail Sales posted a strong gain of 0.8%, above the estimate of 0.6%. Retail Sales surged 1.3%, its strongest gain in over six years. The gain was all the more impressive as the markets had anticipated a decline of 0.3%. Consumer confidence also looked sharp, as UoM Consumer Sentiment jumped to 95.8 points, compared to the estimate of 89.9 points. This was the indicator’s best showing since April 2015. On the inflation front, PPI posted a small gain of 0.2%, shy of the forecast of 0.3%. We’ll get a look at CPI reports on Tuesday. A rate hike remains on the table for June, but the Fed is unlikely to make a move if inflation numbers fail to improve.

EUR/USD Fundamentals

Monday (May 16)

• 12:30 US Empire State Manufacturing Index. Estimate 7.2
• 14:00 US NAHB Housing Market Index. Estimate 59
• 20:00 US TIC Long-Term Purchases. Estimate 36.5B

Upcoming Key Events

Tuesday (May 17)

• 12:30 US Building Permits. Estimate 1.13M
• 12:30 US CPI. Estimate 0.4%
• 12:30 US Core CPI. Estimate 0.2%

*Key events are in bold

*All release times are GMT

EUR/USD for Monday, May 16, 2016

EUR/USD May 16 at 9:30 GMT

Open: 1.1317 Low: 1.1303 High: 1.1330 Close: 1.1322

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• There is resistance at 1.1378
• 1.1278 is providing weak support

Further levels in both directions:

• Below: 1.1278, 1.1172 and 11054
• Above: 1.1378, 1.1495, 1.1609 and 1.1711
• Current range: 1.1278 to 1.1378

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Monday, consistent with the lack of movement from EUR/USD. Short positions command a strong majority (56%). This is indicative of strong trader bias towards EUR/USD breaking out and dropping to lower levels.

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.