EUR/USD – Modest Gains As ZEW Economic Sentiment Sparkles

EUR/USD is slightly higher Tuesday trading, as the pair is trading in the mid-1.33 range in the European session. In economic news, German and Eurozone ZEW Economic Sentiment both climbed sharply, easily beating market expectations. However, Eurozone Account failed to keep pace and missed the estimate. The US continues to post weak releases. On Monday, Empire State Manufacturing Index came in well below the estimate. The markets are hoping for better news from today’s key event, Core CPI.

Eurozone and German ZEW Economic Sentiment looked excellent for August. The German indicator climbed from 42.0 to 49.6 points, beating the estimate of 45.3 points. This was the indicator’s best level since April 2010. However, Eurozone ZEW Economic Sentiment stole the show, rocketing from 44.0 to 58.6 points, a tremendous gain. This crushed the estimate of 47.2 points, and was the highest level recorded since September 2009. These excellent readings reflect the view of financial market experts that the German and Eurozone economies are picking up steam, and further strong data out of the euro would likely lift the euro higher.

Bernard Bernanke will step down as head of the US Federal Reserve at the end of January, and the race to replace Bernanke has taken a dramatic twist. Former Treasury Secretary Lawrence Summers was considered the leading contender for the prestigious position. Surprisingly, Summers has withdrawn his nomination, leaving Vice Chairman Janet Yellen as the favored candidate. Yellen is considered dovish and may be hesitant when it comes to QE tapering. The dollar responded to the news of Summers’ withdrawal by losing ground against the major currencies.

What’s ailing the US economy?  UoM Consumer Sentiment ended a mostly disappointing week on a sour note. The key indicator dropped from 80.0 points in July to 76.8 in August, its lowest level since March. This weak figure comes on the heels of weak US retail sales releases on Thursday. The new week didn’t start out much better, as Empire State Manufacturing Index, an important release, posted another sharp drop in August. The indicator fell from 8.2 points to 6.3 points. This was way off the estimate of 9.2 points. The markets are hoping that the US can get back on track on Tuesday, with the release of Core CPI, a key event.

This week’s highlight is the FOMC Statement, scheduled for release on Wednesday, when the Federal Reserve concludes its two-day policy meeting. The markets have been speculating about QE tapering for months, and we could see the Fed take action in the upcoming statement. However, there is a stronger likelihood that QE tapering will not begin till later in the year, as US economic releases, particularly employment data, could be stronger. Traders should be prepared for some volatility from EUR/USD once the FOMC Statement is released.

EUR/USD for Tuesday, September 17, 2013

EUR/USD 1.3361 H: 1.3370 L: 1.3325

EUR/USD Technical

• EUR/USD has moved slightly higher on Tuesday, as the proximate support and resistance levels (S1 and R1 above) remain in place.
• The pair continues to face resistance at 1.3410. This line could be tested if the euro continues to push higher. The next line of resistance is at 1.3476.
• On the downside, there is support at the round number of 1.33. This is followed by a support level at 1.3162.
• Current range: 1.3300 to 1.3410

Further levels in both directions:

• Below: 1.3300, 1.3162, 1.3100, 1.3050 and 1.3000
• Above: 1.3410, 1.3476, 1.3585 and 1.3649

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to a reversal in movement from Monday, with a move towards short positions in Tuesday trading. This is reflected in the current movement of the pair, as the euro has posted slight gains against the dollar. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar reversing course and making gains at the expense of the euro.

EUR/USD is steady, although it did not take advantage of excellent Economic Sentiment numbers out of Germany and the Eurozone on Tuesday. The US will release Core CPI, a key event, later in the day. We could see some volatility from the pair if the reading is not in line with market expectations.

EUR/USD Fundamentals

• 8:00 Eurozone Current Account. Estimate 18.3B. Actual 16.9B.
• 9:00 German ZEW Economic Sentiment. Estimate 45.3 points. Actual 49.6 points. 
• 9:00 Eurozone ZEW Economic Sentiment. Estimate 47.2 points. Actual 58.6 points.
• 9:00 Eurozone Trade Balance. Estimate 15.3B. Actual 11.1B.
• 12:15 US Treasury Secretary Jack Lew Speaks.
• 12:30 US Core CPI. Estimate 0.1%.
• 12:30 US CPI. Estimate 0.2%.
• 13:00 US TIC Long-Term Purchases. Estimate -45.3B.
• 14:00 US NAHB  Housing Market Index. Estimate 59 points.

*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.