EUR/USD – Eurozone PPI Slips, Euro Edges Lower

The euro continues to show limited movement on Wednesday. EUR/USD is trading at 1.0860 in the European session. On the release front, Eurozone PPI dropped by 1.0%, higher than the estimate of a 0.9% decline. Spanish Unemployment Change posted a marginal rise of 2.2 thousand. In the US, we’ll get a look at key job numbers, with the release of ADP Nonfarm Payrolls. The markets are expecting a reading of 185 thousand, which would be much lower than the previous reading of 205 thousand. Thursday brings additional employment data, with the release of US Unemployment Claims.

Eurozone inflation numbers continue to languish at very low levels. PPI, a key gauge of inflation in the manufacturing sector, posted a sharp decline of 1.0% in January, its worst showing since December 2014. Consumer inflation indicators are also pointing downwards. Eurozone CPI missed expectations and dropped into negative territory in January, with a reading of -0.1%. This figure comes on the heels of weak CPI numbers out of France and Spain, both of which missed expectations. A dismal inflation picture is sure to increase the pressure on ECB head Mario Draghi to take monetary action at the ECB’s policy meeting next week. What can we expect from the ECB? Possible moves include adopting negative interest rates (a step recently taken by the BoJ) or expanding quantitative easing scheme, which currently involves asset purchases of 60 billion euros/mth. Either of these moves would likely push the euro to lower levels, so the markets will be keeping a close eye on the upcoming ECB policy meeting.

The US economy has slowed down in early 2016, unable to maintain the torrid pace which characterized the second half of last year. This has dampened expectations about a rate hike by the Federal Reserve in March, as Fed policymakers have stated that economic conditions will have to improve before another monetary move. Meanwhile, January reports from the housing sector are raising concerns. Housing Starts and Building Applications fell in January, and New Home Sales and Pending Home Sales followed suit, missing expectations. Activity in the housing sector is closely monitored by analysts, as a decrease in home building can affect other sectors of the economy. The US manufacturing sector has also struggled, but there was positive news last week as Core Durable Goods Orders and Durable Goods Orders were much stronger than expected in January.

Wednesday (Mar. 2)

• 3:00 Spanish Unemployment Change. Estimate 0.2K. Actual 2.2K
• 5:00 Eurozone PPI. Estimate -0.9%. Actual -1.0%
• 8:15 US ADP Nonfarm Employment Change. Estimate 185K
• 10:30 US Crude Oil Inventories. Estimate 2.5M
• 14:00 US Beige Book

Upcoming Key Events

Thursday (March 3)

• 8:30 US Unemployment Claims. Estimate 271K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 49.8 points

*Key events are in bold

*All release times are EST

EUR/USD for Wednesday, March 2, 2016

EUR/USD March 2 at 6:15 EST

Open: 1.0885 Low: 1.0893 High: 1.0880 Close: 1.0858

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• 1.0847 is providing weak support
• There is resistance at 1.0941
• Current range: 1.0847 to 1.0941

Further levels in both directions:

• Below: 1.0847, 1.0708 and 1.0616
• Above: 1.0941, 1.1087, 1.1172 and 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement, consistent with the lack of movement from EUR/USD. Long and short positions are close to evenly split, indicative of a lack of trader bias as to what direction the pair will take next.

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.