EUR/USD – Euro Slide Continues After Yellen Remarks

EUR/USD continues to lose ground, after surrendering over a cent on Wednesday. In Thursday’s European session, the pair is trading in the mid-1.37 range, its lowest level in two weeks. At its policy meeting, the Federal Reserve announced a third $10 billion taper and said that interest rates could rise in early 2015. In economic news, German PPI missed the estimate, as Eurozone inflation remains weak. It’s a busy day in the US, with three key events on the schedule – Unemployment Claims, Existing Home Sales and the Philly Fed Manufacturing Index.

The Federal Reserve wrapped up its policy meeting on Wednesday, the first meeting headed by Janet Yellen. The decision to trim QE by another $10 billion was widely expected, but her comments at the follow-up press conference gave the dollar a big boost against its major rivals. Yellen said that the Fed was on track to wind up QE in the fall, and could start to raise interest rates six months later. This is a more aggressive approach towards higher rates than the markets had expected, and the dollar responded by climbing over 100 points against the euro.

German economic indicators have been one of the few bright lights in the Eurozone economy, but the German locomotive is also suffering from persistently low inflation. The German Producer Price Index came in at a flat 0.0%, short of the estimate of +0.2%. Earlier in the week, the German Wholesale Price Index posted a decline of 0.1%, its fourth drop in five releases. Mario Draghi continues to insist that there is no inflation problem in the Eurozone, but the markets may not share his optimism, as Eurozone inflation indicators continue to look listless.

The European Stability Mechanism, which is the Eurozone’s bailout fund, was confirmed as legal by the German Federal Constitutional Court on Tuesday. Germany is the biggest contributor to the EUR 970 billion fund. In February, the court deferred a decision on the Outright Monetary Transactions, which is credited with saving weak members of the Eurozone, to the European Court of Justice.

EUR/USD for Thursday, March 20, 2014

EUR/USD March 20 at 11:20 GMT

EUR/USD 1.3760 H: 1.3845 L: 1.3757

EUR/USD Technical

• EUR/USD continues to lose ground in Thursday trade. The pair dropped below the 1.38 line in the European session and continues to head lower.
• 1.3786 is the next line of resistance. It is a weak line and could see further action during the day. The next resistance line is 1.3893.
• 1.3649 is providing strong support.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585 and 1.3410 and 1.3335
• Above: 1.3786, 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio has posted strong gains in long positions on Thursday. This is consistent with the euro’s strong losses, which have led to the covering of long positions, resulting in an increase in open short positions. Short positions retain a strong majority, indicative of trader bias towards the dollar continuing to move higher.

The euro is in full retreat as it trades in the mid-1.37 range. EUR/USD continues to lose ground in the European session.

EUR/USD Fundamentals

• 7:00 German PPI. Estimate 0.2%. Actual 0.0%.
• Day 1 – EU Economic Summit.
• 12:30 US Unemployment Claims. Estimate 327K. 
• 14:00 US Existing Home Sales. Estimate 4.65M.
• 14:00 US Philly Fed Manufacturing Index. Estimate 4.2 points.
• 14:00 US CB Leading Index. Estimate 0.3%.
• 14:30 US Natural Gas Storage. Estimate -58B.
• 20:00 US Bank Stress Test Results.

*Key releases are highlighted in bold

*All release times are GMT

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.