EUR/USD – Euro Subdued, Markets Await German Business, Confidence Reports

EUR/USD is quiet on Monday, as the pair trades at 112.60 in the European session. On the release front, Eurozone Current Account came in at EUR 25.4 billion, short of expectations. Later in the day, the Eurozone releases Consumer Confidence. In the US, the sole event on the schedule is Existing Home Sales, with the markets expecting the indicator to slip to 5.32 million. On Tuesday, we’ll get a look at two key German indicators – Ifo Business Climate and ZEW Economic Sentiment.

Weak inflation numbers continue to raise concerns about the health of the Eurozone economy. On Friday, German PPI, which measures inflation in the manufacturing sector, came in at  -0.5%, below the forecast of -0.2%. It marked the seventh straight decline for the indicator. Consumer inflation data has also been dismal, as Eurozone Final CPI came in at -0.2% earlier last week. These numbers underscore a sluggish Eurozone economy, and the markets are far  from convinced that recent easing moves by the ECB, which includes lowering interest rates and expanding the bond-purchase program, will right the leaking ship.

If there is one thing that markets are allergic to, it is uncertainty, so conflicting statements from senior ECB policy officials run the risk of creating a market backlash. Earlier in March, the markets were treated to a roller-coaster ride, as the euro initially slid after the ECB announced significant easing measures, only to reverse and climb sharply after ECB head Mario Draghi stated in a press conference that the central bank had no plans to further lower rates. However, ECB chief economist Peter Praet appears to have contradicted his boss in a newspaper interview published on Friday, stating that rates have not reached their lowest limits. Praet was very clear that the ECB could make further cuts to rates, stating “if negative shocks should worsen the outlook or if financing conditions should not adjust in the direction and to the extent that is necessary to boost the economy and inflation, a rate reduction remains in our armoury”. Will the markets react to Praet’s comments? The euro lost ground on Friday, and conflicting statements out of senior ECB headquarters will likely raise eyebrows about the ECB’s future monetary policy plans.

EUR/USD Fundamentals

Monday (March 21)

• 9:00 Eurozone Current Account. Estimate 26.3B. Actual 25.4B
• 11:00 German Buba Monthly Report
• 14:00 US Existing Home Sales. Estimate 5.32M
• 15:00 Eurozone Consumer Confidence. Estimate -8 

Upcoming Key Events

Tuesday (March 22)

• 9:00 German Ifo Business Climate. Estimate 106.1
• 10:00 German ZEW Economic Sentiment. Estimate 6.3 

*Key events are in bold

*All release times are GMT

EUR/USD for Monday, March 21, 2016

EUR/USD March 21 at 10:10 GMT

Open: 1.1274 Low: 1.1234 High: 1.1285 Close: 1.1262

EUR/USD Technical

• EUR/USD has shown marginal movement in the Asian and European sessions
• 1.1278 was tested in resistance and remains under strong pressure
• 1.1172 is providing support

Further levels in both directions:

• Below: 1.1172, 1.1087, 1.0941 and 1.0847
• Above: 1.1278, 1.1387, 1.1495, and 1.1638
• Current range: 1.1172 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with the lack of movement from the pair. Short positions have a strong majority (64%), which is indicative of strong trader bias towards EUR/USD heading 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.