EUR/USD – Firm in Holiday-Thin Trade

EUR/USD has edged higher in Thursday trade, with the pair slightly above the 1.36 line in the European session. We can expect thin trading during the day, with the German and French markets closed for a bank holiday.  The sole Eurozone release is the Italian 10-year Bond Auction. In the US, there are three major events on the calendar – Preliminary GDP, Unemployment Claims and Pending Housing Sales.

Although German and French markets are closed, traders should be prepared for some movement from EUR/USD later on Thursday, as the US releases three market movers – Preliminary GDP, Unemployment Claims and Pending Home Sales. The markets are expecting a decline in the GDP reading, something which hasn’t occurred since 2009. Will the indicator surprise the markets with a gain in Q1? Pending Home Sales are expected to soften in April, while Unemployment Claims are expected to improve this week, after a disappointing performance in the previous release.

The US consumer continues to be optimistic, which is good news for the US recovery. On Tuesday, CB Consumer Confidence continued to look strong as the key indicator improved to 83.0 points in April, which was within expectations. This was the third straight reading above the 80-point level. US Manufacturing data was mixed, as Core Durable Goods Orders posted a paltry gain of 0.1%, while Durable Goods Orders easily beat the estimate with a 0.8% gain.

Despite clear signals to the contrary, ECB head Mario Draghi has made a habit of shrugging off concerns about deflation in the Eurozone for months. That finally changed earlier this week, when Draghi acknowledged that deflation was a serious issue and that the ECB stood ready to take action. This was another sign that the ECB seems serious about taking monetary action at its policy meeting next month. The monetary tools available to the ECB include a reduction in interest rates, asset purchases, or liquidity injections. Any one of these moves would likely have a strong impact on EUR/USD, which has lost ground since testing the 1.40 level earlier in May.

The Eurozone is abuzz following stunning victories by anti-EU parties in European parliamentary elections held on Sunday. These “euroskeptic” parties posted strong gains across the continent, notably in France, the UK and Greece. With Eurozone countries suffering from weak growth and high unemployment, voters had a chance to lash back in the elections, and their frustration and anger was heard loud and clear at the ballot box. French Prime Minister Manuel Valls called the results an “earthquake” and the elections could weigh on the euro, although so far the currency has remained firm. At the same time, the EU cannot afford a ‘business as usual’ approach after such elections results, so we could soon see changes in economic policies which could affect the euro.

EUR/USD for Thursday, May 29, 2014

EUR/USD May 28 at 10:10 GMT

EUR/USD 1.3616 H: 1.3620 L: 1.3586

EUR/USD Technical

• The euro has reversed directions and posted gains in Thursday trade. The pair dipped below the 1.36 late in the Asian session but has recovered in European trading.
• 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.

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 Thursday trading. 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 continuing to post gains.

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

EUR/USD Fundamentals

• Tentative – Italian 10-year Bond Auction.
• 12:30 US Preliminary GDP. Estimate -0.6%.
• 12:30 US Unemployment Claims. Estimate 321K.
• 12:30 US Preliminary GDP Price Index. Estimate 1.3%.
• 14:00 US Pending Home Sales. Estimate 1.1%.
• 14:30 US Natural Gas Storage. Estimate 110B.
• 15:00 US Crude Oil Inventories. Estimate -0.1M.

*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.