EUR/USD – Euro Under Pressure, Markets Eye US Consumer Confidence Report

EUR/USD is flat on Friday, following three consecutive losing sessions this week. The euro is trading at 1.1250 in European trade. In economic news, the Eurozone releases Trade Balance later today. The markets are expecting the trade surplus to rise to EUR 21.9 billion. In the US, the key event on the schedule is UoM Consumer Sentiment, with the estimate standing at 91.9 points. As well, the US releases two important manufacturing reports – the Empire State Manufacturing Index and Industrial Production.

A key problem affecting the Eurozone economy is that of a lack of inflation, as weak growth in the bloc has raised the nightmarish scenario of deflation. This week’s inflation releases were a mix. Although Eurozone Final CPI did not impress at 0.0%, there was some positive inflation data from the two largest economies in the bloc, Germany and France. French Final CPI posted a strong gain of 0.7% in March, its strongest gain in 12 months. Earlier in the week, German Final CPI improved 0.8%, which also marked a 12-month high. German WPI ended a nasty streak of 7 declines, posting a gain of 0.3%. The ECB continues to closely monitor inflation numbers, which have remained well below the ECB target of about 2.0%, despite significant monetary moves by the central bank in March, such as cutting interest rates and expanding the ECB asset-purchase program. In March, Mario Draghi stated that the ECB would not lower interest anytime soon, which leaves the ECB with limited monetary options. With the ECB holding its monthly policy meeting next week, it will be interesting to see if the ECB makes any moves.

US inflation indicators continue to point to a soft inflation picture. CPI and Core CPI, key gauges of consumer inflation, posted small gains of 0.1%. The Core CPI release was particularly disappointing, coming after two consecutive gains of 0.3%. The weak inflation numbers will make it difficult to make a case for raising interest rates in the first half of 2016 and bolsters the dovish position of Janet Yellen and her supporters. Deustche Bank analyst Brett Ryan summed up the soft US inflation picture, noting that “we’re still importing deflation from other areas of the world”. There was much better news on the employment front, as Unemployment Claims fell to 253 thousand, its lowest weekly reading since March 1973. This release is another confirmation of a robust US labor market.

The US economy continues to perform well, despite some weak sectors, such as the manufacturing industry. US manufacturers continue to face stiff competition with countries that pay much lower wages, such as China, India, Bangladesh and other Asian countries. With turbulent global economic conditions leading to weaker demand, the manufacturing sector is facing additional challenges. The Empire State Manufacturing Index has recorded mostly sharp declines since the second half of 2015, but the markets are hoping for a gain in the March report. On Friday, the US will also release the Capacity Utilization Rate and Industrial Production.

 

EUR/USD Fundamentals

Friday (April 15)

• 8:00 Italian Trade Balance. Estimate 2.33B

• 9:00 Eurozone Trade Balance. Estimate 21.9B 12:30 US Empire State Manufacturing Index. Estimate 2.1

• 13:15 US Capacity Utilization Rate. Estimate 75.4%

• 13:15 US Industrial Production. Estimate -0.1%

• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 91.9

• 14:00 US Preliminary UoM Inflation Expectations

• 20:00 US TIC Long-Term Purchases

EUR/USD Technical

S1	S2	S1	R1	R2	R3
1.0989	1.1087	1.1172	1.1278	1.1378	1.1495

 

 

 

 

 

 

 

• EUR/USD has been flat in the Asian and European sessions

• 1.1172 is providing support

• 1.1278 was tested earlier in resistance and is a weak line

Further levels in both directions:

• Below: 1.1172, 1.1087 and 1.0989

• Above: 1.1278, 1.1378, 1.1495 and 1.1609

• Current range: 1.1172 to 1.1278