EUR/USD – Dollar Rallies After FOMC Minutes, Strong Housing Numbers

The US dollar continues to post gains against the euro. On Wednesday, EUR/USD dropped close to one cent, and the downward trend continues on Thursday, as the euro struggles to remain above the 1.33 line. The dollar received a boost after the release of the FOMC minutes as well as an excellent release from US Existing Homes. In Thursday’s economic news, French PMIs were a disappointment, but German and Eurozone PMIs beat their estimates. Today’s major release out of the US is Unemployment Claims. As well, the Jackson Hole Symposium, which brings together finance ministers and central bankers from all over the world, kicks off on Thursday.

There has been plenty of speculation about when the Federal Reserve will scale back its QE program, and the markets were hopeful that the release on Wednesday of the FOMC minutes of its most recent policy meeting would shed some light on the Fed’s plans. The minutes didn’t contain any dramatic news, but the US dollar still gained almost one cent against the euro. Fed officials were described as “broadly comfortable” with plans to taper QE, but remain split on the timing of such a move. The policymakers noted that recent US economic data was “mixed” and all members agreed that it was still too early to scale back the current QE program, under which the Fed purchases $85 billion in assets each month. The markets are anticipating that the Fed will make a move in the near future, and traders should be prepared for a scaling back of QE as early as September.

There was more mixed economic news out of the Eurozone, which released Services and Manufacturing PMIs on Thursday. French numbers were a disappointment, but German and Eurozone PMIs were all above the 50-point level, which indicates expansion in the services and manufacturing sectors. Despite the positive news, the euro failed to take advantage and lost more ground against the US dollar on Thursday.

It appears that Greece will receive another bailout to boost its ailing economy. German finance minister Wolfgang Schaeuble said as much earlier this week. The funds would help the Greek government deal with a funding shortfall over the next few years. Although the sums involved will be relatively small compared to previous rescue packages, another bailout possibility is already drawing sharp criticism in Germany, which faces national elections in September. As Germany is the Eurozone’s biggest economy, it will end up contributing the largest share of any bailout.

EUR/USD for Thursday, August 22, 2013

EUR/USD 1.3311 H: 1.3364 L: 1.3299

EUR/USD Technical

EUR/USD continues to lose ground in Thursday trading. The pair traded quietly in the Asian session and consolidated at 1.3347. EUR/USD continues to lose ground in European trading. There is resistance at the round number of 1.34. This line has strengthened as the pair trades at lower levels. The next line of resistance is at 1.3476.

On the downside, the pair continues to receive support at 1.3275. This line has weakened and could face more pressure if the dollar continues to rally. There is stronger support at 1.3162.

• Current range: 1.3275 to 1.3400

Further levels in both directions:

• Below: 1.3275, 1.3162, 1.3100, 1.3050 and 1.3000
• Above: 1.34, 1.3476, 1.3585 and 1.3649

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to movement towards long positions. This is not reflected in the pair’s current movement, as the US dollar continues to gain ground against the euro. If the movement in the ratio continues, it could be an early sign of a reversal of the current downward direction by the pair.

The euro is struggling to stay above the 1.33 line. Will the dollar’s rally continue? We could see some volatility from the pair, as the US releases key employment data later today.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Estimate 50.4 points. Actual 49.7 points.
• 7:00 French Flash Services PMI. Estimate 49.3 points. Actual 47.7 points.
• 7:30 German Flash Manufacturing PMI. Estimate 52.0 points. Actual 51.1 points.
• 7:30 German Flash Services PMI. Estimate 51.7 points. Actual 52.4 points.
• 8:00 Eurozone Flash Manufacturing PMI. Estimate 50.9 points. Actual 51.3 points.
• 8:00 Eurozone Flash Services PMI. Estimate 50.2 points. Actual 51.0 points.
• 12:30 US Unemployment Claims. Estimate 329K.
• 13:00 US Flash Manufacturing PMI. Estimate 54.1 points.
• 13:00 US HPI. Estimate 0.6%.
• 14:00 US CB Leading Index. Estimate 0.5%.
• 14:30 US Natural Gas Storage. Estimate 68B.
• Day 1 – Jackson Hole Symposium.
• 19:15 Treasury Secretary Jack Lew Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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