EUR/USD – Sliding Euro Falls to 9-Year Lows

EUR/USD continues to lose ground on Thursday, as the pair trades in the mid-1.17 range in the European session. The euro has lost over 200 points in the first week in January, as the pair finds itself at its lowest levels since December 2009. Will the euro’s slide continue this week? On the release front, Eurozone Retail Sales posted a strong gain of 0.6%. German Factory Orders posted a sharp decline of 2.4%. Over in the US, today’s highlight is Unemployment Claims, with an estimate of 291 thousand.

Eurozone inflation numbers remain mired at low levels. Eurozone CPI dipped to -0.2% in December, its first decline since September 2009. German Preliminary CPI remained stuck at 0.0% in December, unchanged from the November report. This missed the very modest estimate of 0.1%. The readings come at a crucial time, with the ECB holding a policy meeting on January 22. With the threat of deflation hanging over the Eurozone like a dark cloud, the ECB could respond with quantitative easing, which would mean buying large amounts of Eurozone bonds. QE worked well in the US, but the Federal Reserve was calling the shots and was able to implement and then taper QE as it pleased. It’s a far different story in Europe, as the powerful German Bundesbank has voiced its opposition to such a move and ECB head Mario Draghi will find it difficult to take such a dramatic step without a strong consensus. If the ECB does pull the ECB trigger, the shaky euro is likely to fall even further early in 2015.

The Federal Reserve released the minutes of its previous meeting, with no surprises for the markets. There was a lot of speculation that the insertion of the word “patience” in the previous policy statement signaled a more aggressive monetary stance. However, the minutes said that Fed members remained of the view that Fed policy had not changed, and that a rate hike would not occur before April. The markets are expecting a rate hike sometimes in 2015, but it’s hard to be any more precise. Although economic growth continues to improve, inflation remains at very low levels, which means that the economy is in no danger of overheating, so there is no immediate need for a rate increase.

EUR/USD for Thursday, January 8, 2015

EUR/USD January 8 at 11:35 GMT

EUR/USD 1.1770 H: 1.1847 L: 1.1764

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has posted losses in the European session, breaking below support at 1.1802.
• 1.1802 has switched to a resistance role as the euro continues to lose ground. 1.1926 is stronger.
• 1.1734 is providing weak support. 1.1634 is stronger.
• Current range: 1.1734 to 1.1802

Further levels in both directions:

• Below: 1.1734, 1.1634, 1.1525 and 1.1426
• Above: 1.1802, 1.1926, 1.2042, 1.2143 and 1.2286

OANDA’s Open Positions Ratio

EUR/USD is pointing to gains in short positions on Thursday, reversing the direction seen a day earlier. This is consistent with the pair’s movement, as the euro continues to post more losses. The ratio is close to a split of long and short open positions, indicative of a lack of trader bias towards where the euro is headed next.

EUR/USD Fundamentals

• 7:00 German Factory Orders. Estimate -0.6%. Actual -2.4%.
• 9:59 French 10-year Bond Auction. Actual 0.79%.
• 10:00 Eurozone Retail Sales. Estimate 0.3%. Actual 0.6%.
• 10:00 Eurozone PPI. Estimate -0.2%. Actual -0.3%.
• 12:30 US Challenger Job Cuts.
• 13:30 US Unemployment Claims. Estimate 291K.
• 15:30 US Natural Gas Storage. Estimate -120B.
• 20:00 US Consumer Credit. Estimate 15.1B.

*Key releases are highlighted in bold

*All release times are GMT

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