EUR/USD – Euro Rises to 1.12 on Positive Inflation Report

The euro has posted slight gains on Tuesday, as EUR/USD trades at the 1.12 level. On the release front, there was positive news from Eurozone releases, as Eurozone PPI and Spanish Unemployment Change both beat expectations. In the US, today’s major event is Personal Spending, with the estimate standing at 0.3%. On Wednesday, the US releases two key events – ISM Non-Manufacturing PMI and ADP Nonfarm Employment Change.

The euro is on an impressive run, gaining some 300 points since July 27. The pair is trading at the 1.12 line, its highest level since the Brexit vote in late June. There was some good news on the inflation front, as Eurozone PPI posted a respectable gain of 0.7%, edging above the forecast of 0.6%. This marked the highest monthly gain since October 2012, and follows a CPI reading of 0.2%, which beat expectations. Is inflation on the rise? If so, there will be less pressure on the ECB to adopt easing measures in order to stimulate the economy and raise inflation levels, which have languished near the zero level or lower. Meanwhile, there were no surprises from key Eurozone Manufacturing PMIs, as the market estimates were on the money. German and Eurozone releases pointed to slight expansion, but the French reading of 48.5 indicated contraction. We’ll get a look at German Factory Reports on Friday. This important indicator has struggled, with just one gain in 2016.

The US dollar was broadly lower on Friday, following an unexpectedly soft US GDP report. The euro took advantage and gained about 100 points. US Preliminary GDP for the second quarter was projected at 2.6%, but posted a much smaller gain of 1.6%. The soft reading not only pushed the dollar lower, but has dampened enthusiasm regarding a rate hike by the Federal Reserve, which last week stayed on the sidelines yet again. On Monday, FOMC William Dudley, a close ally of Janet Yellen, said that the Brexit fallout posed a risk to the US economy and urged the Fed to proceed with caution before raising interest rates. The US will release wage growth and nonfarm payrolls later in the week, and these key employment numbers will be carefully monitored by the Fed as it mulls over a possible rate hike. If these releases do not meet expectations, the likelihood of a rate hike in September will sharply decrease.

EUR/USD Fundamentals

Tuesday (August 2)

  • 7:00 Spanish Unemployment Change. Estimate -70.0K. Actual -84.0K
  • 9:00 Eurozone PPI. Estimate 0.4%. Actual 0.7%
  • 12:30 US Core PCE Price Index. Estimate 0.1%
  • 12:30 US Personal Spending. Estimate 0.3%
  • 12:30 US Personal Income. Estimate 0.3%
  • All Day – US Total Vehicle Sales. Estimate 17.1M

Upcoming Key Events

Wednesday (August 3)

  • 12:15 ADP Non-Farm Employment Change. Estimate 171K
  • 14:00 US ISM Non-Manufacturing PMI. Estimate 56.0

* Key releases are in bold

*All release times are GMT

EUR/USD for Tuesday, August 2, 2016

EUR/USD August 2 at 12:15 GMT

Open: 1.1160 High: 1.1208 Low: 1.1162 Close: 1.1195

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0925 1.1054 1.1150 1.1278 1.1376 1.1467
  • EUR/USD was flat in the Asian session and has posted small gains in the European session
  •  1.1150 is providing support
  •  There is resistance at 1.1278

Further levels in both directions:

  • Below: 1.1150, 1.1054, 1.0925 and 1.0821
  • Above: 1.1278, 1.1376 and 1.1467
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio remains almost unchanged on Tuesday. Short positions have a strong majority (61%), indicative of trader bias towards EUR/USD continuing to move 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.

Kenny Fisher

Kenny Fisher

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