EUR/USD – Lower After ECB Inflation Comments

EUR/USD continues to drop lower on Thursday, as the pair trades in the mid-1.37 range in the European session. The euro has now lost close to a cent since the beginning of the week. In economic news, US manufacturing numbers were a mix on Wednesday. In Thursday action, Eurozone M3 Money Supply and Private Loans met expectations. In the US, there are two key events, Unemployment Claims and Pending Home Sales. As well, we’ll get a look at US Final GDP.

With the Eurozone struggling with weak inflation and the euro continuing to trade at high levels, the ECB is openly considering QE and negative rates. German Bundesbank head Jens Weidmann gave support to a negative deposit rate in order to respond to the strong euro. He also raised the possibility of a QE scheme for the ECB, whereby the central bank would purchase loans or other assets in order to fight deflation, which remains a serious concern. Mario Draghi also spoke on the issue, saying that the ECB is ready to act if inflation slips further.

German Consumer Climate remains at high levels, posting a second straight reading of 8.5 points, matching the forecast. The indicator has steadily risen, and the last time we saw a stronger reading was back in 2007, before the global economic crisis. German Business Climate also looked sharp in February. Increasing consumer confidence usually translates into more consumer spending, which is a critical component of economic growth.

US readings continue to paint a mixed picture, thanks to releases which have been pointing in both directions. Core Durable Goods Orders posted a weak gain of 0.2%, shy of the estimate of 0.3%. Durable Goods Orders looked sharper, jumping 2.2% last month. This broke a mini-streak of two straight declines, and easily surpassed the estimate of 1.1%. On Tuesday, New Home Sales missed the forecast but CB Consumer Confidence climbed to a six-year high.

Ukraine’s economy is in shambles as a result of the four-month political crisis. Prime Minister Arseniy Yatsenyuk acknowledged that the country is on the edge of bankruptcy, and GDP could drop by 3% this year. However, help is on the way. The IMF is set to sign a two-year loan of up to $18 billion, and the EU has offered a package of EUR 11 billion. Ukraine has already received two bailouts from the IMF since 2008, and will have to implement budget cuts and other measures in order to receive the new package from the IMF.

EUR/USD for Thursday, March 27, 2014

EUR/USD March 27 at 11:45 GMT

EUR/USD 1.3758 H: 1.3797 L: 1.3741

EUR/USD Technical

• EUR/USD continues to lose ground in Thursday trade. The pair touched a high of 1.3797 late in the Asian session but was unable to consolidate at these levels.
• 1.3649 is providing support. There is stronger support at 1.3585.
• 1.3786 has switched to resistance as the euro continues to lose ground. This is a weak line and could see pressure during the day. This is followed by 1.3893.
• Current range: 1.3649 to 1.3786

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3786, 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio has posted gains in long positions on Thursday, continuing the direction we saw a day earlier. This is not consistent with the pair’s current movement, as the euro has posted losses. Short positions retain a strong majority, indicative of trader bias towards the dollar continuing to move higher at the expense of the euro.

The euro continues to lose ground on Thursday. The dollar remains under pressure in the European session.

EUR/USD Fundamentals

• 9:00 Eurozone M3 Money Supply. Estimate 1.3%. Actual 1.3%.
• 9:00 Eurozone Private Loans. Estimate -2.1%. Actual -2.2%.
• 12:30 US Unemployment Claims. Estimate 326K.
• 12:30 US FOMC Member Sandra Pianalto Speaks.
• 12:30 US Final GDP. Estimate 2.7%.
• 12:30 US Final GDP Price Index. Estimate 1.6%.
• 14:00 US Pending Home Sales. Estimate 0.1%.
• 14:30 US Natural Gas Storage. Estimate -49B.

*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.