EUR/USD – Steady Ahead of ECB Meeting

EUR/USD is stable on Thursday, as the pair trades just above the 1.36 line in the European session. In economic news, today’s highlight is the ECB policy statement, with the central bank expected to take monetary action. There was some good news out of the Eurozone as German Factory Orders hit a seven-month high, and Retail Sales beat the estimate. In the US, today’s major event is Unemployment Claims.

All eyes are on the ECB policy statement later and follow-up press conference later on Thursday. With Eurozone inflation mired at low levels, there is a strong likelihood that the ECB could finally pull the trigger and take action at its policy meeting on Thursday. The central bank could elect to reduce the benchmark interest rate or deposit rates. However, the latter is currently at the zero level, and the ECB has never before lowered deposit rates into negative territory. Another option is asset purchases, which has been used extensively by the US and UK central banks.

Eurozone inflation indicators continue to hover at low levels. Eurozone Flash CPI Estimate, the primary gauge of consumer inflation in the Eurozone, fell to 0.5% in May, short of the estimate of 0.7%, and is nowhere near the ECB target of 2% inflation. On Monday, German Preliminary CPI disappointed with a second straight decline. The index came in at -0.1%, short of the estimate of +0.1%. The persistently low inflation levels affecting the region are a serious threat to a recovery by the Eurozone economy, and have fuelled speculation that the ECB can no longer afford to ignore the situation and will take action at its Thursday policy meeting.

In the US, ADP Nonfarm Payrolls had been on an upward trend, but that ended on Wednesday, as the key employment indicator took a tumble. The indicator dropped to 179 thousand, well off the April reading of 220 thousand. The estimate stood at 217 thousand. The dollar held firm despite the weak reading, but the euro could gain ground if the official Nonfarm Payrolls release follow suit with a poor result on Friday. Later on Thursday, we’ll get a look at Unemployment Claims, with the markets expecting a slight rise in claims.

EUR/USD for Thursday, June 5, 2014

EUR/USD June 5 at 8:55 GMT

EUR/USD 1.3610 H: 1.3614 L: 1.3594

EUR/USD Technical

• EUR/USD is flat on Thursday, continuing the trend we’ve seen throughout the week.
• 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.
• 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 has a majority of long positions, indicative of a trader bias towards the euro breaking out and posting further gains.

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

EUR/USD Fundamentals

• 6:00 German Factory Orders. Estimate 1.3%. Actual 3.1%.
• 8:10 Eurozone Retail PMI.
• 9:00 Eurozone Retail Sales. Estimate 0.1%. Actual 0.4%.
• Tentative – French 10-year Bond Auction.
• 11:30 US Challenger Job Cuts.
• 11:45 ECB Minimum Bid Rate. Estimate 0.10%.
• 12:30 ECB Press Conference.
• 12:30 US Unemployment Claims. Estimate 309 thousand.
• 14:30 US Natural Gas Storage. Estimate 116B.
• 17:30 US FOMC Member Narayana Kocherlakota Speaks.

*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.