EUR/USD - Euro Firm As PMI Misses Expectations

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

EUR/USD is trading in the mid-1.37 line as we start the new trading week. The euro wrapped up the week with sharp gains, gaining about a cent on Friday. In Monday events, Spanish and Italian Manufacturing PMIs missed their estimates. As well, ECB head Mario Draghi will testify before the Committee on Economic and Monetary Affairs of the European Parliament. In the US, today's highlight is ISM Manufacturing PMI.

Analysts carefully monitor PMI releases, as purchasing managers are considered to have a strong understanding of the health of the economy. Spanish Manufacturing PMI came in at 52.5 points, short of the estimate of 53.2 points. The Italian number came in at 52.3, missing the estimate of 53.7 points. Eurozone Manufacturing PMI, a minor release, matched the estimate at 53.2.

German numbers looked sharp last week. On Friday, Retail Sales jumped 2.5%, crushing the estimate of 1.2%. German GfK Consumer Climate continues to rise, as the key indicator moved upwards for a fourth straight month. Earlier in the week, German Ifo Business Climate and Unemployment Change declined by 14 thousand, its third straight decline. With the ECB under pressure to take action and boost the sputtering eurozone economy, good news from Germany, the largest economy in the bloc, is especially welcome. Meanwhile, the data out of other major eurozone members was much worse. French Consumer Spending declined by 2.1%, its worst showing in almost two years, and well off the estimate of -0.8%. Italian Quarterly Unemployment jumped to 12.6%, up from 12.3% the month before. The estimate stood at 12.4%.

The US wrapped up the week on a sour note, as Pending Home Sales posted a paltry gain of 0.1%, well below the estimate of a 2.9% gain. However, the reading was a strong improvement over the January reading of -8.7%. Earlier in the week, Unemployment Claims came in above the estimate and GDP also missed the forecast. Although market sentiment remains positive about the US economy, recent key releases have not impressed, and the dollar will find itself under pressure this week if US numbers don't show improvement.

Federal Reserve Chair Janet Yellen testified last week before a Senate committee. As expected, Yellen said that the Fed remains committed to tapering QE and would like to wind up the bond-buying scheme by the fall. At the same time, she acknowledged the string of weak US releases recently and said that the Fed would closely monitor to what extent the weak numbers are due to cold weather and what portion can be attributed to a "softer outlook". The next Fed policy meeting takes place in mid-March and the markets will be expecting another $10 billion cut to QE.

EUR/USD for Monday, March 3, 2014

Forex Rate Graph 21/1/13

EUR/USD March 3 at 15:10 GMT

EUR/USD 1.3766 H: 1.3793 L: 1.3758

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 is steady in Monday trading. The pair touched a high of 1.3793 late in the Asian session but has retracted.
  • On the downside, 1.3649 has some breathing room after strong gains by the euro on Friday. The next support line is at 1.3585.
  • 1.3786 is the first line of resistance. It is a weak line and could be tested during the day. This is followed by resistance at 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 pointing to gains in short positions on Monday continuing the trend we saw late last week, This is consistent with the pair's current movement, as the euro has posted slight losses against the dollar. Short positions retain a strong majority, indicative of trader bias towards the dollar continuing to move to higher ground.

The euro is steady in Monday trading. EUR/USD has edged lower early in the North American session.

EUR/USD Fundamentals

  • All Day - G7 Meetings.
  • 8:15 German Spanish Manufacturing PMI. Estimate 53.2 points. Actual 52.5 points.
  • 8:45 German Spanish Manufacturing PMI. Estimate 53.7 points. Actual 52.3 points.
  • 9:00 Eurozone Final Manufacturing PMI. Estimate 53.2 points. Actual 53.3 points.
  • 13:30 US Core PCE Price Index. Estimate 0.1%. Actual 0.1%.
  • 13:30 US Core Personal Spending. Estimate 0.4%. Actual 0.2%.
  • 13:30 US Personal Income. Estimate 0.2. %. Actual 0.3%.
  • 14:00 ECB President Speaks Before a EU Parliamentary Committee.
  • 14:00 US Final Manufacturing PMI. Estimate 56.7 points. Actual 57.1 points.
  • 15:00 US ISM Manufacturing PMI. Estimate 52.3 points.
  • 15:00 US Construction Spending. Estimate 0.0%.
  • 15:00 US ISM Manufacturing Prices. Estimate 57.2 points.
  • All Day - US Total Vehicle Sales. Estimate 15.3M.

*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.