EUR/USD is not showing much activity on Thursday, as the pair is trading in the mid-1.37 range. In economic developments, Eurozone Industrial Production disappointed, posting a sharp decline of 1.1%. Later in the day, ECB President Mario Draghi will speak about ECB policy at the European Parliament in Strasbourg. It's a busy schedule over in the US, with three major events - Core Retail Sales, Retail Sales and Unemployment Claims. So we could see some volatility from EUR/USD during the day.
Eurozone manufacturing data has been less than impressive this week. On Thursday, Eurozone Industrial Production declined 1.1% for November, its weakest showing in three months. The markets had expected a gain of 0.4%. Earlier in the week, German and French Industrial Production posted declines and fell short of market expectations. These indicators underscore weak economic activity which is hobbling the Eurozone. However, the euro has managed to shrug off weak Eurozone data, and has gained closed to 200 points against the greenback since the start of December.
European Union finance ministers met in Brussels on Tuesday and high on the agenda was a proposal for a European banking union. The aim is to relieve debt-ridden countries from the burden of rescuing failing banks in their countries. Instead, the banks would tap a Eurozone rescue fund, the Single Resolution Mechanism. However, no agreement has been reached on the SRM, and the finance ministers are likely to meet again next week to try and hammer out details of a banking union. ECB head Mario Draghi is a firm supporter of a banking union and has urged national governments to move forward with the plan.
In the US, last week's employment numbers were excellent, as Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate all impressed. The Fed has said that a stronger employment picture is a prerequisite to QE tapering, and last week's numbers certainly increase the possibility of the Fed taking action at its December policy meeting. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper would likely boost the US dollar against the major currencies.
With memories of the October government shutdown still fresh on Capitol Hill, lawmakers have reached a budget deal which Congress will have to approve. The agreement will remove the risk of a government shutdown and reduce the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the economic uncertainty we've seen in recent months. Congress must approve a budget, or the US could face another government shutdown in mid-January.
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EUR/USD December 12 at 10:50 GMT
EUR/USD 1.3773 H: 1.3803 L: 1.3764
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- EUR/USD has edged lower in Thursday trading. The pair briefly crossed above the 1.38 line in the Asian session before retracting.
- On the downside, 1.3649 continues to provide support. This line has some breathing room as the pair trades at higher levels. This is followed by support at 1.3585.
- The pair continues to face resistance at 1.3786. This line was breached earlier today and could face further pressure during the day. Next, there is resistance line at 1.3893, which has remained intact since October 2011.
- Current range: 1.3649 to 1.3786
Further levels in both directions:
- Below: 1.3649, 1.3585, 1.3500, 1.3410 and 1.3325
- Above: 1.3786, 1.3893, 1.4000 and 1.4140
OANDA's Open Positions Ratio
EUR/USD ratio continues to point to gains in short positions in Thursday trading. This is reflected in the pair, with the euro posting slight losses. A large majority of the open positions remain short, indicative of a trader bias towards the dollar reversing directions and posting gains against the euro.
The pair continues to trade in the mid-1.37 range. With the US releasing key employment and retail sales data later in the day, we could see some volatility from EUR/USD.
EUR/USD Fundamentals
- 7:45 French CPI. Exp. 0.1%, Actual 0.0%.
- 8:00 ECB President Mario Draghi Speaks.
- 9:00 ECB Monthly Bulletin.
- 10:00 Eurozone Industrial Production. Exp. 0.4%. Actual -1.2%.
- 13:30 US Core Retail Sales. Exp. 0.2%.
- 13:30 US Retail Sales. Exp. 0.6%.
- 13:30 US Unemployment Claims. Exp. 321K.
- 13:30 US Import Prices. Exp. -0.7%.
- 15:00 US Business Inventories. Exp. 0.4%.
- 15:30 US Natural Gas Storage. Exp. -85B.
- 18:01 US 30-year Bond Auction.