EUR/USD – Eurozone CPI Edges Higher, Euro Flat at 1.10

The euro continues show marginal movement on Thursday, as EUR/USD is trading just above the 1.10 line in the European session. On the release front, it’s a busy day. Eurozone CPI edged up to 0.3%, within expectations. German Consumer Climate beat expectations. In the US, there are two key indicators on the calendar. Core Durable Goods Orders is expected to improve to 0.2%, while Unemployment Claims is forecast to jump up to 271 thousand.

Recent German releases have not looked sharp, but the German consumer remains optimistic. Consumer Climate edged up to 9.5 points, marking a five-point high. This beat the forecast of 9.2 points. Earlier in the week, German Ifo Business Climate dropped to 105.7 points, its weakest reading since December 2014, and underscores deep concern about the state of the economy. The Chinese slowdown is a key reason for pessimism in the business community, as the China is Germany’s fifth largest export markets, so weaker Chinese demand has taken a toll on German exports. If Eurozone growth and inflation numbers do not improve, it will be increasingly difficult for the ECB to remain on the sidelines. The markets are keeping a close eye on the ECB’s policy meeting in March. Possible monetary moves include adopting negative interest rates (a step recently taken by the BoJ) as well as increasing the current quantitative easing scheme, which currently involves purchasing assets at 60 billion euros/mth. Either of these moves would likely shake up the currency markets and weaken the euro.

The US economy has softened in the early part of 2016, and the American consumer has become less optimistic about the economy as a result. This was underscored by CB Consumer Confidence, which slid to 92.2 points in February, well off the forecast of 97.4 points. This marked a three-month low for the key indicator. Weaker consumer confidence could well translate into a decrease in consumer spending, a key driver of economic growth. Meanwhile, the US manufacturing sector continues to struggle. Recent manufacturing reports have pointed to contraction in the sector, and this was again the case with the Richmond Manufacturing report, which slipped to -4 points in February, short of the forecast of +2 points. This was the indicator’s worst reading since September 2015. On Thursday, the US releases Core Durable Goods Orders, a key manufacturing indicator. The indicator has posted two straight declines, and the estimate for the January report stands at 0.2%.

Thursday (Feb. 25)

• 2:00 GfK German Consumer Climate. Estimate 9.2 points. Actual 9.5 points
• 4:00 Eurozone M3 Money Supply. Estimate 4.7%. Actual 5.0%
• 4:00 Eurozone Private Loans. Estimate 1.5%. Actual 1.4%
• 5:00 Eurozone Final CPI. Estimate 0.4%. Actual 0.3%
• 5:00 Eurozone Final Core CPI. Estimate 1.0%. Actual 1.0%
• 5:00 Eurozone Italian Retail Sales. Estimate +0.5%. Actual -0.1%
• 8:30 US Core Durable Goods Orders. Estimate 0.2%
• 8:30 US Unemployment Claims. Estimate 271K
• 8:30 US Durable Goods Orders. Estimate 3.0%
• 9:00 US HPI. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate -125B

Upcoming Key Events

Friday (Feb. 26)

• 8:30 US Preliminary GDP. Estimate 0.4%

*Key events are in bold

*All release times are EST

EUR/USD for Friday, February 25, 2016

EUR/USD February 25 at 5:40 EST

Open: 1.1014 Low: 1.1004 High: 1.1139 Close: 1.1018

EUR/USD Technical

• EUR/USD has shown slight movement in the Asian and European sessions
• There is resistance at 1.1087
• 10941 is providing weak support
• Current range: 1.0941 to 1.1087

Further levels in both directions:

• Below: 1.0941, 1.0847 and 1.0708
• Above: 1.1087, 1.1172, 1.1278 and 1.1349

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement, consistent with the lack of significant activity from EUR/USD. Short positions retain a strong majority of positions (55%). This points to trader bias towards the euro breaking out and moving 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.