EUR/USD - Euro Improves, Shrugs Off Weak GDP Data

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

By Kenny Fisher

EUR/USD has posted modest gains on Thursday, as the pair continues to trade in the high-1.33 range. On the release front, it's a busy day in the eurozone. GDP data from Germany, France and the eurozone missed the estimates, while eurozone inflation indicators matched the forecast. In the US, today's key event is Unemployment Claims. The markets are expecting the indicator to rise back above the 300 thousand level, with an estimate of 307 thousand.

Despite broad interest rate cuts by the ECB in June, growth and inflation levels have not risen. Economic growth remains in the doldrums. French Preliminary GDP remained flat at 0.0%, unchanged from a month earlier. German Preliminary GDP slipped to -0.2%, the first contraction in the German economy since Q4 of 2012. Eurozone Flash GDP also weakened to -0.2%, down from 0.0% in the previous release. All three GDP releases missed their estimates, and the weak numbers could push the euro even lower.

Eurozone inflation levels remain low, as the danger of deflation continues. Eurozone Final CPI dipped to 0.4%, down from 0.5% a month earlier. Eurozone Final Core CPI, a minor event, remained unchanged at 0.8%. Both indicators matched the forecast. On Wednesday, German inflation numbers remained weak, while French CPI posted its first decline since January.

With the Eurozone economy sputtering, it shouldn't come as a surprise that confidence indicators are pointing sharply downwards. German ZEW Economic Sentiment, a key release, took a tumble in July, falling to just 8.6 points, down from 27.1 points a month earlier, and its lowest level since November 2012. Weakening confidence in the economy could lead to decreased spending and hiring and weigh on economic growth.

In the US, retail sales data disappointed on Wednesday. Retail Sales dropped to a flat 0.0% last month, its weakest showing since January. The estimate stood at 0.2%. Core Retail Sales wasn't much better, posting a gain of 0.1%, down from 0.4% a month earlier. This was well short of the estimate of 0.4%. Retail sales are the primary gauge of consumer spending, and July's weak numbers points to a slow start to the third quarter. Although unemployment levels have dropped, this has not translated into stronger spending by the US consumer. We'll get a look at Unemployment Claims later in the day. The markets are expecting a weaker reading than the week before, with the estimate at 307 thousand.

In the US, JOLTS Job Openings improved to 4.67 million, its third consecutive gain from the previous release. However, this fell short of expectations, as the estimate stood at 4.74 million. In the US, employment indicators are under the market microscope, as the strength of the labor market is one of the most important factors influencing the Federal Reserve regarding the timing of an interest rate hike. A rate increase is expected by mid-2015, but stronger economic data, especially on the employment front, could hasten a move by the Fed.

EUR/USD for Thursday, August 14, 2014

EUR/USD August 14 at 9:35 GMT

EUR/USD 1.3384 H: 1.3396 L: 1.3349

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 showed little movement in Asian trading. In the European session, the pair has moved higher.
  • 1.3346 is a weak support line. 1.3295 is stronger.
  • 1.3487 is a strong resistance line.
  • 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 1.3793

OANDA's Open Positions Ratio

EUR/USD ratio is unchanged in Thursday trade. This is not consistent with the pair's current movement, as the euro has posted modest 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

  • 5:30 French Preliminary GDP. Estimate 0.1%. Actual 0.0%.
  • 6:00 German Preliminary GDP. Estimate -0.1%. Actual -0.2%.
  • 6:45 French Preliminary Non-Farm Payrolls. Estimate -0.1%. Actual +0.1%.
  • 8:00 ECB Monthly Bulletin.
  • 9:00 Eurozone Final CPI. Estimate 0.4%. Actual o.4%.
  • 9:00 Eurozone Flash GDP. Estimate 0.1%. Actual 0.0%.
  • 9:00 Eurozone Final Core CPI. Estimate 0.8%. Actual 0.8%.
  • 12:30 US Unemployment Claims. Estimate 307K.
  • 12:30 US Import Prices. Estimate -0.2%.
  • 14:30 US Natural Gas Storage. Estimate 81B.
  • 17:01 US 30-year Bond Auction.

*Key releases are highlighted in bold

*All release times are GMT

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