EUR/USD - Euro Firm On Mixed Eurozone Data

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

by Kenny Fisher

EUR/USD is steady on Friday, as the pair trades slightly shy of the 1.34 level. It's a quiet day on the release front as we wrap up the trading week. In the Eurozone, German Trade Balance softened, while French Industrial Production rebounded with its strongest gain of the year. In the US, there are no major events today.

As expected, the ECB maintained interest rates at 0.15%. ECB head Mario Draghi didn't add anything dramatic in his press conference, acknowledging that the Eurozone continues to grapple with weak growth and inflation levels. Draghi said that the ECB forecasts "moderate" improvement in growth and that interest rates will remain at current levels for the near future. On the inflation front, Draghi does not expect any improvement before 2015. With interest rates already at record lows, the ECB may be forced to resort to unconventional monetary tools if the situation worsens.

German numbers continue to struggle, pointing to trouble in Eurozone's largest economy. On Friday, the trade surplus narrowed to $16.2 billion, well off the estimate of $19.8 billion. This was the lowest level in three months. This follows weak manufacturing numbers, as Industrial Production and Factory Production missed expectations. The Bundesbank is blaming tensions with Russia and stronger EU sanctions against Moscow for the weak economic numbers, as Germany is Russia's number one trading partner in Europe. With economic indicators pointing downward and confidence in the German economy ebbing, we could see a decline in German GDP in the second quarter, which could have a chilling effect on the shaky euro.

US Unemployment Claims dipped back below the 300 thousand level last week. The key indicator dropped to 289 thousand, beating the estimate of 305 thousand. The four-week claims average, which is less volatile than the weekly count, dipped to 293,500, its lowest level since February 2006. The stronger numbers point to increased hiring in response to stronger demand, which in turn has contributed to gains in income and stronger consumer spending. An improving job market is critical for economic growth, and the dollar has gained broad strength as key US data points upwards.

PMI releases are closely tracked by analysts, as they are important gauges of the strength of the manufacturing and services sectors. On Tuesday, ISM Non-manufacturing PMI looked sharp, rising to 58.7 points last month. This easily beat the estimate of 56.6, and was the index's best showing since February 2011. This follows an excellent Manufacturing PMI reading last week, with the index climbing to 57.1 points, a three-year high. There was more positive news on Tuesday, as Factory Orders had an impressive July, gaining 1.1%. These solid numbers point to healthy expansion in the US manufacturing and services sectors, which has helped the dollar gain ground at the euro's expense.

EUR/USD for Friday, August 8, 2014

EUR/USD August 8 at 9:40 GMT

EUR/USD 1.3392 H: 1.3408 L: 1.3343

EUR/USD Technical

S3 S2 S1 R1 R2 R3
1.3175 1.3295 1.3346 1.3487 1.3585 1.3651
Click to enlarge
  • EUR/USD posted gains late in the Asian session, climbing to a high of 1.3408. The pair is steady in the European session.
  • 1.3346 is an immediate support line. 1.3295 is stronger.
  • 1.3487 is providing strong resistance.
  • Current range: 1.3346 to 1.3487

Further levels in both directions:

  • Below: 1.3346, 1.3295, 1.3175 and 1.3104
  • Above: 1.3487, 1.3585, 1.3651 and 1.37

OANDA's Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions in Friday trade, reversing the direction seen a day earlier. This is consistent with the movement from the pair, as the euro has posted gains. The ratio has a majority of long positions, indicative of trader bias towards the euro continuing to move to higher ground.

EUR/USD Fundamentals

  • 6:00 German Trade Balance. Estimate 19.8B. Actual 16.2B.
  • 6:45 French Industrial Production. Estimate 1.1%. Actual 1.3%.
  • 8:40 French Government Budget Balance. Actual -59.4B.
  • 12:30 US Preliminary Nonfarm Productivity. Estimate 1.4%.
  • 12:30 US Preliminary Unit Labor Costs. Actual 1.3%.
  • 14:00 US Wholesale Inventories. Estimate 0.6%.

*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.