EUR/USD - Euro Yawning, PMIs Meet Expectations

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

The euro is unchanged on Monday, following sharp gains in the Friday session. EUR/USD is currently trading at 1.1170. On the release front, manufacturing PMIs are in focus in both the Eurozone and the US. German Manufacturing PMI came in at 53.7, while Eurozone Manufacturing PMI showed a reading of 52.0. Both figures were very close to the estimates. Later in the day, the US will release ISM Manufacturing PMI. Little change is expected in the July reading, with an estimate of 53.1 points.

The euro gained closed to 100 points on Friday and closed the week at 1.1170, its highest level since the Brexit vote in late June. The euro took advantage of a surprisingly soft US GDP report. Preliminary GDP for the second quarter was projected at 2.6%, but posted a much smaller gain of 1.6%. The soft reading not only pushed the dollar lower, but has dampened enthusiasm regarding a rate hike by the Fed, which last week stayed on the sidelines yet again. On Monday, FOMC William Dudley, a close ally of Janet Yellen, said that the Brexit fallout posed a risk to the US economy and urged the Fed to proceed with caution before raising interest rates. The US will release wage growth and nonfarm payrolls later in the week, and these key employment numbers will be carefully monitored by the Fed as it mulls over a possible September hike.

There were no surprises from key Eurozone Manufacturing PMIs, as the market estimates were on the money. German and Eurozone releases pointed to slight expansion, but the French reading of 48.5 indicates contraction. We’ll get a look at German Factory Reports on Friday. This important indicator has struggled, with just one gain in 2016. The markets are expecting a gain of 0.5% in the June report. On the inflation front, there was slight improvement in the Eurozone CPI report. The index posted a small gain of 0.2%, beating the forecast of 0.1%. Although not a strong reading, this marked a second straight gain after a nasty streak of four consecutive declines. Are inflation levels slowly on their way upwards? Core CPI remained at 0.9%, but French and Italian CPI both posted declines and missed their estimates, as the French and Italian economies continue to struggle.

EUR/USD Fundamentals

Monday (August 1)

  • 1:15 FOMC Member William Dudley Speaks
  • 7:15 Spanish Manufacturing PMI. Estimate 51.6. Actual 51.0
  • 7:45 Italian Manufacturing PMI. Estimate 52.5. Actual 51.2
  • 7:50 French Final Manufacturing PMI. Estimate 48.6. Actual 48.6
  • 7:55 German Final Manufacturing PMI. Estimate 53.7. Actual 53.8
  • 8:00 Eurozone Final Manufacturing PMI. Estimate 51.9. Actual 52.0
  • 13:45 US Final Manufacturing PMI. Estimate 52.9
  • 14:00 ISM Manufacturing PMI. Estimate 53.1
  • 14:00 US Construction Spending. Estimate 0.5%
  • 14:00 ISM Manufacturing Prices. Estimate 61.0
  • Tentative – US Loan Officer Survey

* Key releases are in bold

*All release times are GMT

EUR/USD for Monday, August 1, 2016

EUR/USD August 1 at 8:35 GMT

Open: 1.1167 High: 1.1181 Low: 1.1160 Close: 1.1173

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0925 1.1054 1.1150 1.1278 1.1376 1.1467
Click to enlarge
  • EUR/USD was flat in the Asian session and this trend continues in the European session
  • 1.1050 is under pressure in support. It could break during the Monday session
  • 1.1250 is a strong resistance line

Further levels in both directions:

  • Below: 1.1150, 1.1054, 1.0925, 1.0821 and 1.0708
  • Above: 1.1278, 1.1376 and 1.1467
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio showed gains in long positions on Friday, consistent with strong gains by EUR/USD on Friday. Short positions have a strong majority (63%), indicative of trader bias towards EUR/USD breaking out and moving lower.

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.