EUR/USD - Steady After Strong German Business Climate

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 |  Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The euro is showing little movement to start off the week, as EUR/USD trades in the mid-1.37 on Monday. Eurozone releases jumped out of the gates on Monday, as German Ifo Business Climate improved in January, posting its best showing in over two years. Eurozone CPI showed little change in January, with a gain of 0.8%. Over in the US, Existing Home Sales disappointed on Friday, as the key indicator slumped to its lowest level since July 2012. The sole US release is Flash Services PMI.

German data looked sharp on Monday, as German Ifo Business Climate improved to 111.3 points last month, beating the estimate of 110.7. The key indicator has been on the upswing since early 2013, and January's reading was the best since May 2011. The strong German numbers were a welcome change from last week, when German ZEW Economic Sentiment slipped badly and PMI releases were mixed. On the inflation front, eurozone CPI and core CPI both came in at 0.8%, within expectations but significantly lower than the ECB inflation target of 2.0%. If inflation continue remain steady, we could see the ECB stand pat and refrain from any monetary moves, as was the case earlier this month.

US numbers continue to raise concerns. After weak releases from Building Permits and the Philly Manufacturing Index, Existing Home Sales sagged on Friday, dropping to 4.62 million in January, compared to 4.87 million a month earlier. This was well short of the estimate of 4.73 million, and the lowest reading from the key indicator since July 2012. The markets will be hoping for better news from New Home Sales on Wednesday.

Last week's Federal Reserve minutes indicated that interest rates are unlikely to rise, even if unemployment drops to 6.5%. Previously, the Fed had said it would consider raising rates at the 6.5% threshold, but with unemployment falling faster than expected, Fed policymakers agreed that it would “soon be appropriate” to revise the Fed’s forward guidance regarding interest rate levels. The minutes also indicated that the Fed will likely continue trimming QE, barring any downturns in the economy.

EUR/USD for Monday, February 24, 2014

Forex Rate Graph 21/1/13

EUR/USD February 24 at 11:30 GMT

EUR/USD 1.3746 H: 1.3773 L: 1.3728

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3410 1.3585 1.3649 1.3786 1.3893 1.4000
Click to enlarge
  • EUR/USD has posted modest gains in Monday trade.
  • 1.3649 is providing strong support. The next support line is at 1.3585.
  • 1.3786 is the next line of resistance. This line has weakened and could face pressure if the euro continues to move to higher ground. This is followed by 1.3893, which is protecting the 1.39 level.
  • Current range: 1.3649 to 1.3786

Further levels in both directions:

  • Below: 1.3649, 1.3585, 1.3410, 1.3347 and 1.3255
  • Above: 1.3786, 1.3893, 1.4000 and 1.4149.

OANDA's Open Positions Ratio

EUR/USD ratio is unchanged on Monday, continuing the trend we saw on Friday. This is consistent with the pair's current movement, as the pair is showing little movement. Short positions have a strong majority, indicative of trader bias towards the dollar moving higher against the euro.

The euro continues to look strong, trading in the mid-1.37 range. EUR/USD has edged lower in the European session.

EUR/USD Fundamentals

  • 9:00 German Ifo Business Climate. Estimate 110.7 points. Actual 111.3 points.
  • 10:00 Eurozone CPI. Estimate 0.7%. Actual 0.8%.
  • 10:00 Eurozone Core CPI. Estimate 0.8%. Actual 0.8%.
  • 14:00 Belgian NBB Business Climate. Estimate -5.4 points.
  • 14:00 US Flash Services PMI. Estimate 56.9 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.