EUR/USD - Euro Under Pressure, Eurozone CPI Flat At 0.0%

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

EUR/USD remains under pressure on Thursday, following sharp losses in the Wednesday session. The euro is trading at 1.1270 in the European session. On the release front, Eurozone Final CPI posted a flat reading of 0.0%, while Final Core CPI came in at 1.0%. Both indicators were within expectations. The US will also release CPI reports later in the day, as well as Unemployment Claims. On Friday, we’ll get a look at the UoM Consumer Sentiment Index, a key gauge of consumer confidence.

A major headache for Mario Draghi and his colleagues at the ECB has been the persistent lack of inflation in the Eurozone economy, as weak growth in the bloc as raised the nightmarish scenario of deflation. Although Eurozone Final CPI did not impress at 0.0%, there was some positive inflation data from the two largest economies in the bloc. French Final CPI posted a strong gain of 0.7% in March, its strongest gain in 12 months. Earlier in the week, German Final CPI improved 0.8%, which also marked a 12-month high. German WPI broke a nasty streak of 7 declines, posting a gain of 0.3%. Strong inflation numbers are welcome news for the ECB, which has made significant monetary moves in 2016 but inflation and growth levels have remained weak. The ECB holds its monthly policy meeting next week, and the markets will be closely monitoring inflation and other key releases, looking for clues as to what moves, if any, Draghi & Co. could announce next week.

The US released retail sales and inflation reports on Wednesday, and the results were a disappointment across the board. Core Retail Sales improved to 0.2%, but fell short of the forecast of 0.4%. Retail Sales surprised with a decline of 0.3%, shy of the estimate of a 0.1% gain. This marked the second straight drop for the indicator. Consumer spending represents the biggest part of the economy, so these figures could spell trouble at a time that the export sector remains soft due to weak global demand. There was no relief from PPI, a key gauge of inflation in the manufacturing sector. The index dipped 0.1%, its third decline in four releases. This was well off the estimate of a 0.3% gain. Will we see some relief from CPI on Thursday? If not, the euro could rebound against the dollar. A weak reading would also raise concerns about the strength of the US economy, and could dent hopes for a June rate hike by the Federal Reserve, which is unlikely to make any moves before inflation levels rise.

EUR/USD Fundamentals

Thursday (April 14)

  • 9:00 Eurozone Final CPI. Estimate -0.1%. Actual 0.0%
  • 9:00 Eurozone Final Core CPI. Estimate 1.0%. Actual 1.0%
  • 12:30 US CPI. Estimate 0.2%
  • 12:30 US Core CPI. Estimate 0.2%
  • 12:30 US Unemployment Claims. Estimate 270K
  • 14:30 FOMC Member Jerome Powell Speaks
  • 14:30 US Natural Gas Storage. Estimate 1B
  • 17:01 US 30-year Bond Auction

Upcoming Key Events

Friday (April 15)

  • 14:00 US Preliminary UoM Consumer Sentiment. Estimate 91.9

*Key events are in bold

*All release times are GMT

EUR/USD for Thursday, April 14, 2016

EUR/USD April 14 at 9:00 GMT

Open: 1.1277 Low: 1.1233 High: 1.1278 Close: 1.1267

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0989 1.1087 1.1172 1.1278 1.1378 1.1495
Click to enlarge
  • EUR/USD posted small losses in Asian session and continues to lose ground in the European session
  • 1.1378 remains fluid and has switched to a resistance role. It was tested earlier and remains a weak line
  • 1.1278 is providing support

Further levels in both directions:

  • Below: 1.1172, 1.1087 and 1.0989
  • Above: 1.1278, 1.1378, 1.1495 and 1.1609
  • Current range: 1.1172 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement on Thursday, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (65%), indicative of strong trader bias towards EUR/USD continuing to move to lower levels.

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.