EUR/USD - Steady Ahead of U.S. Services PMI

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

EUR/USD has posted modest losses in Tuesday trading, as the pair trades below the 1.35 line in the European session. The dollar continues to put pressure on the euro, as there is increasing speculation that the ECB may lower interest rates at its meeting on Thursday in order to boost growth in the eurozone. Taking a look at economic releases, Spanish Unemployment rose sharply in September and eurozone PPI missed the estimate. Over in the U.S., today's highlight is ISM Non-Manufacturing PMI.

It was a was a week to forget for the euro, which lost around 300 points and closed the week below the 1.35 line. German data disappointed and eurozone CPI dropped to 0.7% in October, compared to 1.1% the month before. On Tuesday, eurozone PPI posted a paltry gain of 0.1%, short of the estimate of 0.3%. This is well below the ECB’s inflation target of 2.0%. The euro finds itself at a six-week low against the dollar, and speculation is growing that the ECB might reduce interest rates in order to boost growth, perhaps as early as this week. The ECB meets for a policy meeting on Thursday, and the possibility of a rate cut is sure to be discussed. The argument against cutting interest rates is that with rates already at a record low of 0.50%, a cut of 0.25% might not have much impact. With all this uncertainty in the air, there's a good chance that we'll see some volatility from the euro during the week.

The Federal Reserve met for a policy meeting last week, the first since Congress reached an agreement on the debt ceiling and the shutdown. As expected, the Fed said that it would maintain QE at current levels of $85 billion each month. However, the Fed's policy statement was less dovish than expected, as the Fed noted that the economy was expanding "at a moderate pace" and left the door open for QE tapering in December. However, the prevailing view in the markets is that short of a sharp turnaround in US numbers, QE tapering will be on hold until early 2014.

EUR/USD for Tuesday, November 5, 2013

Forex Rate Graph 21/1/13

EUR/USD November 5 at 11:25 GMT

EUR/USD 1.3492 H: 1.3522 L: 1.3478

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3265 1.3325 1.3410 1.3500 1.3585 1.3649
Click to enlarge
  • EUR/USD has posted modest losses on Tuesday, as the pair tests resistance at 1.3500. There is a stronger line of resistance at 1.3585.
  • On the downside, there is support at 1.3410. This is followed by a support line at 1.3325, which has remained firm since mid-September.
  • Current range: 1.3410 to 1.3500

Further levels in both directions:

  • Below: 1.3410, 1.3325, 1.3265 and 1.3149
  • Above: 1.3500, 1.3585, 1.3649, 1.3786 and 1.3893

OANDA's Open Positions Ratio

EUR/USD ratio is showing slight gains towards long positions in Tuesday trading. This is not reflected in the current movement of the pair, as the euro has posted modest losses against the dollar.

EUR/USD continues to have a fairly quiet week, as the pair trades close to the 1.35 line. We could see some movement in the North American session, following the release of the ISM Non-Manufacturing PMI.

EUR/USD Fundamentals

  • 8:00 Spanish Unemployment Change. Estimate 31.3K. Actual 87.0K.
  • 9:30 EU Economic Forecasts.
  • 10:00 eurozone PPI. Estimate 0.3%. Actual 0.1%.
  • 15:00 US ISM Non-Manufacturing PMI. Estimate 54.2 points.
  • 15:00 US IBD/TIPP Economic Optimism. Estimate 41.1 points.

*Key releases are highlighted in bold

*All release times are GMT

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.