EUR/USD – Steady As Euro Manufacturing PMIs Slide

EUR/USD has edged lower on Thursday, as the pair trades in the high-1.36 range in the European session. After a quiet week on the release front, there a host of events out of the Eurozone and the US today. In the Eurozone, German, French and Eurozone Manufacturing PMIs all softened in April and missed their estimates. Services PMI improved in Germany and the Eurozone, but the French numbers weakened. In the US, the Federal Reserve minutes were cautious in tone, eliciting little reaction from the markets. On Thursday, there are two key releases on the schedule – Unemployment Claims and Existing Home Sales.

The Federal Reserve minutes were released on Wednesday, and there was no dramatic response from the markets. In the minutes, policymakers discussed an exit strategy from its QE stimulus program, which is set to terminate at the end of 2014. This will likely mean an increase in interest rates, but the minutes didn’t provide a timetable as to when rates might go up, and by how much. Low inflation levels means there is less pressure on the Fed to raise rates next year, but the economic conditions could change in the meantime. The Federal Reserve remains comfortable with its accommodative stance, and will want to see stronger growth and employment numbers before making changes to monetary policy, such as raising rates.

Eurozone, German and French Manufacturing PMIs softened in April, pointing to trouble in the manufacturing sector of the major Eurozone members. The French indicator dipped to 49.3 points, pointing to contraction. German and Eurozone data remained above the 50-point level, which points to expansion, but both fell short of expectations. ECB head Mario Draghi has said that the ECB could take monetary action at is June meeting depending on inflation and growth levels, and weak PMIs is one more reason why the ECB could well pull the trigger in June.

After climbing close to the key 1.40 level earlier in May, the euro slumped and headed for the hills after ECB president Mario Draghi stated he was prepared to take action in June to tackle low growth and weak inflation. The markets have heard tough talk (and no action) from Draghi before, but there is a feeling in the air that the June ECB meeting could be different. There is speculation that the ECB could cut the benchmark rate, which is currently at just 0.25%, or lower deposit rates, which are at 0%, into negative territory. As we get closer to the June meeting, we can expect some volatility from EUR/USD.

EUR/USD for Thursday, May 22, 2014

EUR/USD May 22 at 9:30 GMT

EUR/USD 1.3683 H: 1.3686 L: 1.3658

EUR/USD Technical

• 1.3649 is providing strong support.
• On the upside, the pair is testing 1.3786. Will the euro break above this line? There is stronger resistance at 1.3893.

Further levels in both directions:

• Below: 1.3649, 1.3585, 1.3487 and 1.3346
• Above: 1.3786, 1.3893, 1.4000, 1.4149

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in Thursday trading, continuing the trend we have seen throughout the week. This is consistent with the movement we are seeing from the pair, as the euro is steady. The ratio runs slightly in favor of long positions, indicative of a slight trader bias towards the euro breaking out and moving higher.

EUR/USD is trading quietly in the high-1.36 range on Thursday. The pair is unchanged in the European session.

EUR/USD Fundamentals

• 7:00 French Flash Manufacturing PMI. Estimate 51.1 points. Actual 49.3 points.
• 7:00 French Flash Services PMI. Estimate 50.3 points. Actual 49.2 points.
• 7:30 German Flash Manufacturing PMI. Estimate 54.0 points. Actual 52.9 points.
• 7:30 German Flash Services PMI. Estimate 54.8 points. Actual 56.4 points.
• 8:00 Eurozone Flash Manufacturing PMI. Estimate 53.2 points. Actual 52.5 points.
• 8:00 Eurozone Flash Services PMI. Estimate 53.0 points. Actual 53.5 points.
• 8:39 Spanish 10-year Bond Auction. Actual 2.97%.
• Day 1 European Parliamentary Elections.
• 12:30 US Unemployment Claims. Estimate 312K.
• 13:45 US Flash Manufacturing PMI. Estimate 55.6 points.
• 14:00 US Existing Home Sales. Estimate 4.71M.
• 14:00 US CB Leading Index. Estimate 0.4%.
• 14:30 US Natural Gas Storage. Estimate 104B.

*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.