EUR/USD – German Business Climate Jumps, Markets Eye US GDP

EUR/USD continues to have a quiet week, as the pair trades at 1.0650 in the European session in Tuesday. In economic news, German Ifo Business Climate improved to 109 points, while German GDP posted a gain of 0.3%. Over in the US, today’s key events are CB Consumer Confidence and Preliminary GDP. On Wednesday, the US will release two major events – Core Durable Goods Orders and Unemployment Claims.

There was good news out of Germany on Tuesday, as Ifo Business Climate, a key indicator, jumped to 109.0 points in November, up from 108.2 points a month earlier. This figure beat the forecast of 108.3 points, and marked the indicator’s best showing since June 2014. German GDP posted a modest gain of 0.3% in the third quarter, matching the forecast. Meanwhile, Eurozone PMIs kicked off the week on a positive note. German and French Manufacturing PMIs were both slightly above the forecast, with German Manufacturing PMI coming in at 52.6 points, and the French indicator at 50.8 points. All of the Services and Manufacturing PMIs in November were above the 50-point level, which separates contraction from expansion. This points to expansion in the manufacturing and services sectors, which is welcome news, as the Eurozone economy has been hampered by weak growth.

Eurozone inflation levels continue to point downward, and this was underscored on Friday, as Germany released PPI for October. The manufacturing inflation index came in at -0.4%, missing the estimate of -0.2%. The struggling indicator has now recorded four decline over the past five months, and has not posted a gain above 0.1% in all of 2015. The ECB remains very concerned about deflation, as indicated in the minutes of its recent November policy meeting. The central bank has revised downwards its inflation outlook, and the markets are keeping a close eye on the next policy meeting on December 3. This will be a critical meeting, as the ECB could elect to cut rates or expand the current asset-purchasing program in order to combat deflation and try to breathe some life into the sluggish economy. Any of these steps will likely weigh on the struggling euro, which is trading at 7-month lows against a strong US dollar.

Will the Federal Reserve press the rate trigger at the December policy meeting? Last week’s Fed minutes did not confirm a December rate hike, but most analysts feel that the long-awaited move will indeed occur next month. Market expectations have risen to 66% that the Fed will make a move next month, and recent comments by Fed policymakers have hinted that a rate move is a strong possibility. At the past two policy meetings, the vote against a rate hike was 9-1, but that clearly will not be the outcome at the December meeting. With the US economy showing improvement and employment and consumer indicators pointing upwards, the markets appear prepared for a small hike of 0.25% or 0.50%, and there is a growing view that modest, incremental moves would not cause unwanted turbulence on the global markets. One remaining question mark in the rate move puzzle is that of inflation levels. Recent inflation readings have been weak, and the Fed has repeatedly stated that inflation is a key consideration in any decision to raise rates. The markets will get a look at key inflation indicators shortly before the critical Fed policy meeting on December 16.

EUR/USD Fundamentals

Tuesday (Nov. 24)

• 7:00 German Final GDP. Estimate 0.3%. Actual 0.3%
• 9:00 German Ifo Business Climate. Estimate 108.3 points. Actual 109 points
• 13:30 US Preliminary GDP. Estimate 2.0%
• 13:30 US Goods Trade Balance. Estimate -61.8B
• 13:30 US Preliminary GDP Price Index. Estimate 1.2%
• 14:00 Belgian NBB Business Climate. Estimate -3.2 points
• 14:00 US S&P/CS Composite-20 HPI. Estimate 5.2%
• 15:00 US CB Consumer Confidence. Estimate 99.3 points
• 15:00 US Richmond Manufacturing Index. Estimate 0 points

Upcoming Key Events

Wednesday (Nov. 25)

• 13:30 US Core Durable Goods Orders. Estimate 0.5%
• 13:30 US Unemployment Claims. Estimate 273K

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Tuesday, November 24, 2015

EUR/USD November 24 at 9:20 GMT

EUR/USD 1.0652 H: 1.0650 L: 1.0618

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has posted slight gains in European trade.
• 1.0659 is a weak resistance line. 1.0732 is stronger.
• 1.0500 is providing strong support.
• Current range: 1.0500 to 1.0659

Further levels in both directions:

• Below: 1.05, 1.0359 and 1.0287
• Above: 1.0659, 1.0732, 1.0847 and 1.0941

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with a lack of movement from the pair. The ratio has a slight majority of long positions (53:47). This indicates slight trader bias towards the pair moving higher.

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.