EUR/USD – Euro Subdued, US Manufacturing, Employment Reports Next

EUR/USD is flat on Thursday, as the pair trades at 1.1170 in the European session. On the release front, German GfK Consumer Climate came in at 9.4 points, within expectations. In the US, there are two key releases on the schedule – Core Durable Goods Orders and Unemployment Claims. On Friday, the US releases Final GDP, with the estimate standing at 1.0%.

It’s been a busy week in Germany, the locomotive of the Eurozone economy. German PMI reports painted a mixed picture, pointing to moderate expansion in the services sector, but almost no growth in the manufacturing industry, which has been hard-hit by the Chinese slowdown. German Ifo Business Climate improved to 106.7 points, beating expectations. ZEW Economic Sentiment improved to 4.3 points, but this was well short of the estimate of 6.3 points. German Consumer Climate edged lower to 9.4 points, within expectations. As well, the ECB announced its LTRO (Long Term Refinancing Option) on Thursday. This lending program aims to bolster the economy by increasing bank lending to the real economy. The actual take-up by European banks was a disappointing EUR 7.3 billion, well short of the forecast of EUR 24.3 billion.

The US manufacturing sector has struggled, hurt by the global slowdown which has meant less demand for US-produced goods. Recent manufacturing readings have reflected a sector in deep trouble, so the markets were surprised as the Richmond Manufacturing Index surged in March. The indicator, which measures activity in the US Atlantic region, jumped to 22 points, its highest level since June 2010. We’ll get a look at additional manufacturing indicators on Thursday, with the release of US durable good reports.

Last week’s Federal Reserve policy statement appeared to pour cold water on any imminent rate hikes, but recent hawkish statements by Federal Reserve officials have surprised the markets and strengthened the US dollar. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June, if economic conditions improve. Although the dot plot (an FOMC projection of rate hikes) was lowered at the March meeting, he insisted that the Fed had not changed its path of rate hikes. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. Lockhart noted that the US economy was holding up well, despite weak global conditions. Lockart said that the economy was close to full employment and the Fed’s target of 2 percent inflation was attainable. There was further support for rate hikes from two other Fed presidents, Patrick Harker and James Bullard. Harker said that given the strong economy, the Fed should consider raising interest rates as early as the April meeting, and added that he favored at least three rate hikes during the year. On Wednesday, Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later. Given this flurry of statements, traders should treat an April move by the Fed as a reasonable possibility, with US employment and inflation numbers having a huge say on the Fed’s decision.

EUR/USD Fundamentals

Thursday (March 24)

• 7:00 German Import Prices. Estimate -0.3%. Actual -0.6%
• 7:00 GfK German Consumer Climate. Estimate 9.5. Actual 9.4
• 9:00 ECB Economic Bulletin
• 10:00 Italian Retail Sales. Estimate 0.0%. Actual 0.0%
• 10:15 Eurozone Targeted LTRO. Estimate 24.3B. Actual 7.3B
• 12:15 US FOMC Member James Bullard Speaks
• 12:30 US Core Durable Goods Orders. Estimate -0.2%
• 12:30 US Unemployment Claims. Estimate 267K
• 12:30 US Durable Goods Orders. Estimate -3.0%
• 13:45 US Flash Services PMI. Estimate 51.3 points
• 14:30 US Natural Gas Storage. Estimate 20B

Upcoming Key Events

Friday (March 25)

• 12:30 US Final GDP. Estimate 1.0%

*Key events are in bold

*All release times are DST

EUR/USD for Thursday, March 24, 2016

EUR/USD March 24 at 10:40 DST

Open: 1.1178 Low: 1.1148 High: 1.1186 Close: 1.1185

EUR/USD Technical

• EUR/USD has shown marginal movement in the Asian and European sessions
• There is resistance at 1.1278
• 1.1172 is under strong pressure in 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 EUR/USD. Short positions have a strong majority (60%), which is indicative of strong trader bias towards EUR/USD dropping 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.