EUR/USD – Euro Subdued as France, Italian Markets on Holiday

The euro is showing limited movement on Monday, as EUR/USD trades at 1.1170. With French and Italian markets on holidays, we can expect an uneventful day from the pair. There are no Eurozone events on the schedule. Later in the day, the US will release the Empire State Manufacturing Index, with the indicator expected to improve to 2.1 points. Tuesday promises to be busier, with the release of German ZEW Economic Sentiment. The key indicator plunged in July by 6.8 points, reflecting market turmoil after the surprise Brexit vote in late June. Also on Tuesday, the US will release Building Permits and consumer inflation reports.

Germany’s economy expanded 0.4% in the second quarter, within expectations. However, this figure was considerably weaker than the 0.7% gain in the first quarter. As the largest economy in the Eurozone, German numbers are often a bellwether for the Eurozone. With the after-effects of the Brexit vote just beginning to be measured, third quarter numbers, including Eurozone GDPs, could drop considerably. On the inflation front, deflation remains a major concern. German CPI and WPI posted small gains of 0.3% and 0.2% respectively, as Eurozone inflation numbers are nowhere near the ECB target of about 2%. France, the number two economy in the Eurozone, saw Final CPI decline 0.4% in July, marking the first decline since January. Recent monetary moves by the BoE, which lowered interest rates and expanded asset purchases, has put further pressure on the ECB to follow suit with further easing.

US releases ended the trading week on a disappointing note. Core Retail Sales dropped 0.3%, while Retail Sales slipped to a flat 0.0%. There was no relief from PPI readings, which measure wholesale prices. PPI came in at -0.4% and Core PPI declined 0.3%. All four releases missed expectations and were lower than their previous readings. UoM Consumer Sentiment improved to 90.4 points, but this fell short of expectations. The soft PPI readings point to ongoing low inflation levels, well below the Federal Reserve’s target of about 2.0%. The Fed next meets in September to decide whether to raise interest rates. A soft GDP report last month had dampened expectations about a rate hike before 2017, but sharp employment numbers, led by a stellar NFP report, raised the odds of a September hike. However, Friday’s soft numbers have again dampened enthusiasm about a rate hike in September, and in all likelihood, the Fed will stay on the sidelines until December or even later.

EUR/USD Fundamentals

Monday (August 15)

• 12:30 US Empire State Manufacturing Index. Estimate 2.1
• 14:00 US NAHB Housing Market Index. Estimate 60
• 20:00 US TIC Long-Term Purchases

Tuesday (August 16)

• 9:00 German ZEW Economic Sentiment. Estimate 2.1
• 12:30 US Building Permits. Estimate 1.16M
• 12:30 US CPI. Estimate 0.0%
• 12:30 US Core CPI. Estimate 0.2%

* Key releases are in bold

*All release times are GMT

EUR/USD for Monday, August 15, 2016

EUR/USD August 15 at 9:20 GMT

Open: 1.1164 High: 1.1174 Low: 1.1152 Close: 1.1168

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions
•  1.1278 is a strong resistance line
•  1.1150 remains fluid. It is a weak support and could break in the Monday session

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Monday, consistent with the lack of movement from EUR/USD. Currently, short positions have a strong majority (56%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.

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.