EUR/USD – Euro Stable Ahead of Eurozone CPI

EUR/USD is not showing much movement on Tuesday, as the pair trades just above the 1.36 in the European session. In economic news, today’s highlight is Eurozone Flash CPI Estimate. In Spain, Unemployment Change dropped sharply to -111.9 thousand, but this was anticipated by the markets due to the summer tourist season. The Italian Unemployment Rate edged lower to 12.6%. It’s a quiet day out of the US, highlighted by Factory Orders.

All eyes are on the Eurozone Flash CPI Estimate, the primary gauge of consumer inflation in the Eurozone. The key indicator rose to 0.7% last month, up from 0.5% a month earlier. However, this fell short of the estimate of 0.8%, and is nowhere near the ECB target of 2% inflation. On Monday, German Preliminary CPI disappointed with a second straight decline. The index came in at -0.1%, short of the estimate of +0.1%. Will we see a better result from the Eurozone inflation indicator?

With Eurozone inflation mired at low levels, there is a strong likelihood that the ECB could finally pull the trigger and take action at its policy meeting on Thursday. The central bank could elect to reduce the benchmark interest rate or deposit rates. However, the latter is currently at the zero level, and the ECB has never before lowered deposit rates into negative territory. Another option is asset purchases, which has been used extensively by the US and UK central banks.

US numbers didn’t look sharp to start the week, as ISM Manufacturing PMI, a key release, dropped to 53.2 points, well off the estimate of 55.7. The index had been moving higher throughout 2014, but this trend came to a crashing halt in the May reading. We’ll get another look at important factory data on Tuesday, with the release of Factory Orders. The indicator has been losing ground, and the markets are bracing for another drop in the May release.

Last week’s US data was a mix. Preliminary GDP, the primary gauge of economic activity, posted its first decline since Q2 of 2009. The indicator came in at -1.0% for Q1, worse than the estimate of -0.6%. Harsh winter conditions took their toll on the economy in Q1, and analysts expect a rebound in Q2. After a strong gain in March, Pending Home Sales softened, coming in at 0.4%. This was nowhere near the gain of 1.1%. On a brighter note, Employment Claims dropped to 300 thousand, easily beating the estimate of 321 thousand. As well, CB Consumer Confidence remains at high levels.

EUR/USD for Tuesday, June 3, 2014

EUR/USD June 3 at 8:05 GMT

EUR/USD 1.3603 H: 1.3609 L: 1.3594

EUR/USD Technical

• EUR/USD is flat on Tuesday, with the pair staying close to the 1.36 line in the Asian and European sessions.
• 1.3585 continues to provide support, but is a weak line. There is stronger support at 1.3487.
• 1.3649 is the next resistance line. 1.3786 is stronger.
• Current range: 1.3585 to 1.3649

Further levels in both directions:

• Below: 1.3585, 1.3487, 1.3346 and 1.3219
• Above: 1.3649, 1.3786, 1.3893, 1.4000 and 1.4149

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions in Tuesday trading, reversing the direction seen a day earlier. This is consistent with the movement we are seeing from the pair, as the euro has edged higher. The ratio has a majority of long positions, indicative of a trader bias towards the euro posting further gains.

EUR/USD is trading slightly above the 1.36 line. The pair is unchanged in the European session.

EUR/USD Fundamentals

• 7:00 Spanish Unemployment Change. Estimate -112.3K. Actual -111.9K.
• 8:00 Italian Monthly Unemployment Rate. Estimate 12.7%. Actual 12.6%.
• 8:00 Italian Quarterly Unemployment Rate. Estimate 12.7%. Actual 12.7%.
• 9:00 Eurozone CPI Flash Estimate. Estimate 0.7%.
• 9:00 Eurozone Unemployment Rate. Estimate 11.8%.
• 14:00 US Factory Orders. Estimate 0.6%.
• 14:00 IBD/TIPP Economic Optimism. Estimate 46.5 points.
• All Day – US Total Vehicle Sales. Estimate 16.0M.

*Key releases are highlighted in bold

*All release times are GMT

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