EUR/USD – Euro Dips as Manufacturing PMIs Soften

EUR/USD ended the week with losses, and the downward trend continues in the Monday session. Currently, the pair is trading at 1.2249, down 0.31% on the day. On the release front, German and eurozone manufacturing PMIs dropped in March, but still pointed to expansion. In the US, Existing Homes is expected to inch up to 5.55 million. On Tuesday, Germany releases Ifo Business Climate and the US publishes CB Consumer Confidence.

The closely-watched manufacturing PMIs lost ground in March. German Manufacturing PMI dropped from 58.4 to 58.1, but beat the estimate of 57.6 points. Eurozone Manufacturing PMI dropped from 56.6 to 56.1, short of the forecast of 56.6 points. The readings remain well above the 50-point level, which separates expansion and contraction. At the same time, there is some concern as manufacturing activity (and general growth) in the eurozone was stronger earlier the year. If second-quarter numbers soften compared to Q1, the euro could respond with losses.

ECB policymakers will have to make some critical decisions later this year, as the bank’s stimulus program is scheduled to wind up in September. A key factor in future monetary policy moves will be inflation levels, which continue to remain well short of the ECB’s target of around 2 percent. Eurozone inflation moved higher in March. Final CPI came in at 1.3%, up from 1.1% a month earlier. Still, the reading fell short of the estimate of 1.4%. As long as inflation remains low, there will be little pressure on the ECB to alter policy. If the economy heats up and inflation moves closer to target, interest rate hikes will have to be considered but remain very unlikely before 2019.

Oil prices and US Yields to dictate the pace this week

U.S Dollar Responds to Higher Yields

EUR/USD Fundamentals

 Monday (April 23)

• 3:00 French Flash Manufacturing PMI. Estimate 53.4. Actual 53.4
• 3:00 French Flash Services PMI. Estimate 56.6. Actual 57.4
• 3:30 German Flash Manufacturing PMI. Estimate 57.6. Actual 58.1
• 3:30 German Flash Services PMI. Estimate 53.9. Actual 54.1
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 56.6. Actual 56.0
• 4:00 Eurozone Flash Services PMI. Estimate 54.8. Actual 55.0
• 6:00 German Buba Monthly Report
• 9:45 US Flash Manufacturing PMI. Estimate 55.2
• 9:45 US Flash Services PMI. Estimate 54.3
• 10:00 US Existing Home Sales. Estimate 5.55M

 Tuesday (April 24)

• 4:00 German Ifo Business Climate. Estimate 104.7
• 10:00 US CB Consumer Confidence.  Estimate 126.0
• 10:00 US New Home Sales. Estimate 625K

*All release times are DST

*Key events are in bold

EUR/USD for Monday, April 23, 2018

EUR/USD for April 23 at 4:40 DST

Open: 1.2287 High: 1.2290 Low: 1.2350 Close: 1.2249

EUR/USD Technical

EUR/USD has edged lower in the Asian and European sessions

• 1.2235 is providing support
• 1.2319 is the next resistance line

Further levels in both directions:

• Below: 1.2235, 1.2092 and 1.2025
• Above: 1.2319, 1.2460, 1.2581 and 1.2662
• Current range: 1.2235 to 1.2319

OANDA’s Open Positions Ratio

In the Monday session, EUR/USD ratio is showing short positions with a majority (54%). This is indicative of EUR/USD continuing to move to lower ground.

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