EUR/USD – Modest Losses in Thin Holiday Trade

EUR/USD is under pressure on Monday, as the pair trades in the low-1.36 range in the European session. In economic news, it’s a quiet day, with French and German markets closed for a holiday. There is just one Eurozone release on the schedule, as Eurozone Sentix Investor Confidence slipped to a six-month low. There are no US releases on Monday.

In the US, employment numbers were solid late last week. Unemployment Claims and Nonfarm Payrolls, both key indicators, met market expectations and helped the dollar hold its own against the euro. Unemployment Claims came in at 312 thousand, slightly above the estimate of 309 thousand. Nonfarm Employment Change met modest expectations on Friday, adding 217 thousand new jobs. The estimate stood at 214 thousand. The Unemployment Rate stayed pegged at 6.3%, beating the estimate of 6.4%.

Mario Draghi and his colleagues finally pressed the trigger on Thursday, as the ECB lowered the benchmark interest rate for the first time since November 2013. The rate was lowered to 0.15%, less than expected by the markets, which had anticipated a cut to 0.10%. As well, the marginal lending rate was cut to 0.40% from 0.75% and the deposit facility rate to -0.10% from 0.0%. This is the first time that the ECB has cut deposit rates below 0%, the aim being to encourage banks to lend more funds to businesses rather than have to pay to park funds overnight with the central bank. Draghi opted not to implement a quantitative easing program, but did hint that further action was on the way if necessary.

The ECB’s rate cuts are a belated response to weak growth and low inflation in the Eurozone, but the markets had expected more. The cut in the benchmark rate was not as deep as anticipated, and many market players were looking for an asset purchase program, such as the schemes adopted by the Federal Reserve and Bank of England. The euro did drop as low as the 1.35 line following the ECB move, but recovered and is back at levels prior to the ECB announcement. It’s safe to say that the markets were underwhelmed by the ECB’s actions, with one analyst saying the ECB had fired a lot of small bullets rather than resorting to a bazooka.

EUR/USD for Monday, June 9, 2014

EUR/USD June 9 at 10:10 GMT

EUR/USD 1.3623 H: 1.3668 L: 1.3617

EUR/USD Technical

• EUR/USD has edged lower on Monday.
• 1.3585 continues to provide support. There is stronger support at 1.3487.
• On the upside, 1.3649 is a weak resistance line. 1.3786 is stronger.
• Current range: 1.3585 to 1.3649

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 showing gains in long positions on Monday. This is not consistent with the movement of the pair, as the euro has posted modest losses at the start of the week. The ratio is almost evenly split between short and long positions, indicative of a lack of trader bias regarding what to expect from EUR/USD.

EUR/USD is trading quietly above the 1.36 line. The pair has edged lower in the European session.

EUR/USD Fundamentals

• 8:30 Eurozone Sentix Investor Confidence. Estimate 13.5 points. Actual 8.5 points.

*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.