EUR/USD – Euro Almost Unchanged, UoM Consumer Confidence Next

EUR/USD is showing little movement on Friday, following sharp losses in the Thursday session. The pair is trading slightly below the 1.13 line. In economic news, German Final CPI gained 0.3%, matching the forecast. German WPI impressed with a gain of 0.9%, well above expectations. The US will release UoM Consumer Sentiment, with the indicator expected to dip to 94.1 points.

Eurozone inflation levels have been a major headache for the ECB, so Friday’s German inflation numbers were a breath of fresh air. German Final CPI bounced back with a gain of 0.3% in April, while WPI climbed 0.9%, its strongest gain since March 2015. Is this a sign that Eurozone inflation levels may be on the way up? On Wednesday, the ECB implemented a corporate sector asset purchasing program, aimed at bolstering inflation. If upcoming inflation indicators point upwards, the ECB will be under less pressure to adopt further easing measures.

Last week’s Nonfarm Payrolls of just 38,000 new jobs shocked the markets and sent the US dollar tumbling. A couple of minor employment indicators were soft, leading to some concern about the strength of the US labor market. However, these concerns should be laid to rest after key job numbers this week were solid and beat expectations. On Wednesday, JOLTS Job Openings improved to 5.79 million, easily beating the forecast of 5.67 million. Unemployment Claims followed suit with a strong reading. The indicator dropped to 264 thousand, compared to an estimate of 269 thousand. Significantly, this marked the lowest jobless report in six weeks. With the Federal Reserve mulling over a rate hike in the next few months, employment numbers will be especially significant, and any unexpected readings could result in volatility in the currency markets.

The euro took a hit on Thursday, losing about 100 points. The currency responded negatively to a bleak message from ECB President Mario Draghi, who was speaking at the Brussels Economic Forum. Draghi said that years of poor growth had hurt the bloc’s productivity and warned that urgent action was needed in order to prevent the economy suffering permanent damage. Draghi said that monetary policy was not enough and structural reform was urgently needed. The ECB head had sounded more optimistic after the ECB policy meeting, when he noted that growth had improved in the first quarter. The threat of deflation continues, as inflation levels have failed to respond to aggressive action by the ECB, which recently earlier in the year lowered the benchmark rate to 0.00% and increased the QE program to EUR 80 billion/mth.

Earlier this week, the ECB released its annual report on the euro, which examined the role of the currency in the global financial system. According to the ECB, the euro’s importance declined in 2015, continuing a trend which has resulted from ultra-low interest rates and negative yields. This marked a sixth straight annual decline in global use of the euro. The ECB found that the “euro remained the second-most important currency in the international monetary system, but with a significant gap to the US dollar“. In 2015, the dollar was used in 43% of global payments, followed by the euro, with a 28.4% market share. The ECB said that “official holders of foreign-exchange reserves have increasingly diversified into non-traditional reserve currencies since the onset of the financial crisis“. The ECB also took note of China’s greater involvement in the currency markets, suggesting that one reason for the fall in euro currency reserves could be the fact that China has started to report some of its currency holdings to the IMF.

EUR/USD Fundamentals

Friday (June 10)

• 6:00 German Final CPI. Estimate 0.3%. Actual 0.3%
• 6:00 German WPI. Estimate 0.2%. Actual 0.9%
• 6:45 French Industrial Production. Estimate 0.5%. Actual 1.2%
• 7:00 German Buba President Jens Weidmann Speaks
• 8:00 Italian Industrial Production. Estimate 0.3%. Actual 0.5%
• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 94.1
• 14:00 US Preliminary UoM Inflation Expectations
• 18:00 US Federal Budget Balance. Estimate -56.2B

* Key releases are in bold

*All release times are GMT

EUR/USD for Friday, June 10, 2016

EUR/USD June 10 at 10:10 GMT

Open: 1.1309 Low: 1.1281 High: 1.1321 Close: 1.1286

EUR/USD Technical

• EUR/US is showing limited movement in the Asian and European sessions
• 1.1278 is under strong pressure in support and could be tested in the Friday session
• 1.1376 has strengthened in resistance following sharp losses by EUR/USD in the Thursday session

Further levels in both directions:

• Below: 1.1278, 1.1054 and 1.0909
• Above: 1.1376, 1.1495 and 1.1638
• Current range: 1.1278 to 1.1376

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, despite sharp losses by EUR/USD in the Thursday session. Short positions have a majority (59%), indicative of trader bias towards EUR/USD resuming its downward movement.

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.