EUR/USD – Euro Edges Higher in Thin Holiday Trade

EUR/USD has edged upwards on Thursday, following sharp losses in the Wednesday session. Currently, the pair is trading at 1.0570. With US markets closed for the Thanksgiving holiday, trade will likely remain light until next week. On the release front, German Ifo Business Climate was unchanged at 110.4 in November. German Final GDP posted a slight gain of 0.2%, matching the forecast. As well, the ECB released its semi-annual Financial Stability Review, which raised concerns about market risks due to political instability.

In Germany, business confidence levels remain high, as underscored in the November Ifo Business Climate report. The index continues to hover around the 110 level, pointing to strong optimism about the German economy. This report is the first look at the German business sector’s reaction to the Trump election victory, and the reading appears to show that German companies are not worried about the US election results. However, the ECB Financial Stability Review was less sanguine. The report warned about the risk of sudden corrections in global markets due to “higher political uncertainty”, which could hurt economic growth. The report didn’t give examples, but it’s a good bet that the political uncertainties include the Brexit vote and Donald Trump’s election as president.

The euro remains under pressure and has dropped down to 1.0517 on Thursday, its lowest level since November 2015. Will the slide continue? A chronically weak Eurozone economy, low interest rates and negative yields have all taken a heavy toll on the currency, and there is growing talk of the euro dropping to parity with the high-flying US dollar. The last time the currencies were at parity was in December 2002. With a strong US economy and monetary divergence continuing to favor the US dollar, the pair could head lower.

The US dollar posted sharp gains on Wednesday, bolstered by excellent durable goods reports. Core Durable Goods Orders rose 1.0%, well above the estimate of 0.2%. Durable Goods Orders surged 4.8%, crushing the estimate of 1.2%. These strong numbers point to a welcome improvement in business investment, and strong consumer fundamentals could see business spending numbers continue to improve. There was positive news on the consumer front, as the UoM Consumer Sentiment index climbed to 93.8, above the forecast of 91.6.

EUR/USD Fundamentals

Thursday (November 24)

• 7:00 German Final GDP. Estimate 0.2%. Actual 0.2%
• 9:00 German Ifo Business Climate. Estimate 110.6. Actual 110.4
• 9:08 ECB Financial Stability Review
• 12:00 GfK German Consumer Climate. Estimate 9.8
• 14:00 Belgian NBB Business Climate. Estimate -1.5

*All release times are GMT

* Key events are in bold

EUR/USD for Thursday, November 24, 2016

EUR/USD November 24 at 11:20 GMT

Open: 1.0541 High: 1.0578 Low: 1.0517 Close: 1.0570

EUR/USD Technical

• EUR/USD showed little movement in the Asian session but has reversed directions and is moving upwards in European trade
• 1.0506 is providing support
• 1.0616 is a weak resistance line

Further levels in both directions:

• Below: 1.0506, 1.0414 and 1.0287
• Above: 1.0616, 1.0708, 1.0821 and 1.0957
• Current range: 1.0506 to 1.0516

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (66%), indicative of trader bias towards EUR/USD reversing directions and moving to lower ground.

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.