Euro Edges Higher As Eurozone, German PMIs Show Expansion
MarketPulse | Aug 23, 2016 06:16AM ET
The euro has posted small gains on Tuesday, as EUR/USD trades at the 1.1330 line. On the release front, Eurozone and German PMIs pointed to expansion, with readings above the 50-point level.
The US will release New Home Sales, with the indicator expected to drop to 575 thousand. Additional housing data will be released on Wednesday, with the publication of Existing Home Sales. The estimate for August stands at 5.55 million, little changed from the previous reading.
There were no surprises from Eurozone PMIs for August, most of which were very close to the estimates. German and Eurozone Manufacturing PMIs both pointed to expansion in the manufacturing sector.
As well, both indicators were showed little changed from the July readings, which indicates that manufacturers continue to be optimistic after the Brexit referendum vote.
There had been widespread fears that the UK’s shock decision to leave the European Union would send the British and Eurozone economies into a tailspin, but these fears have not borne out by July and August data, which has generally been positive.
Low inflation numbers have long been the bane of the Eurozone economy, and last week’s numbers were also soft, although at least the indicators were within market expectations. German PPI, which measures wholesales prices, dipped to 0.2%, compared to 0.4% in the past two readings.
Eurozone Final CPI also posted a gain of 0.2%, after a gain of 0.1% in June. This small gain marks the indicator’s strongest reading in five months, underscoring persistent weakness in inflation levels on the continent.
Weak inflation numbers could put more pressure on the ECB to step in and adopt further easing measures in order to kick-start the weak Eurozone economy and boost inflation.
Central bank heads will meet for the annual tête-à-tête in Jackson Hole on Thursday, and the markets will be looking for hints from Federal Reserve chair Janet Yellen regarding the Fed’s monetary plans, particularly the timing a rate hike. FOMC members are expected to express their views ahead of the key meeting.
Fed Vice Chairman Stanley Fischer took the opportunity and sounded upbeat about the US economy, saying that the Fed was close to its aims of a full labor market and the inflation target of 2 percent . The latter claim sounds a bit optimistic, as US inflation levels have consistently been closer to zero than the 2 percent level. It will be interesting to see if Janet Yellen follows suit and expresses satisfaction with current inflation levels.
EUR/USD Fundamentals
Tuesday (August 23)
- 7:00 French Flash Manufacturing PMI. Estimate 49.1. Actual 48.5
- 7:00 French Flash Services PMI. Estimate 50.6. Actual 52.0
- 7:30 German Flash Manufacturing PMI. Estimate 53.7. Actual 53.6
- 7:30 German Flash Services PMI. Estimate 54.3. Actual 53.3
- 8:00 Eurozone Flash Manufacturing PMI. Estimate 52.1. Actual 51.8
- 8:00 Eurozone Flash Services PMI. Estimate 53.0. Actual 53.1
- 13:45 US Flash Manufacturing PMI. Estimate 53.1
- 14:00 Eurozone Consumer Confidence. Estimate -8 points
- 14:00 US New Home Sales. Estimate 575K
- 14:00 US Richmond Manufacturing Index. Estimate 6 points
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Wednesday (August 24)
- 14:00 US Existing Home Sales. Estimate 5.55M
*All release times are EDT
* Key events are in bold
EUR/USD for Tuesday, August 23, 2016
EUR/USD August 22 at 5:30 GMT
Open: 1.1317 High: 1.1342 Low: 1.1315 Close: 1.1331
EUR/USD Technical
| S1 | S2 | S1 | R1 | R2 | R3 |
| 1.1054 | 1.1150 | 1.1278 | 1.1376 | 1.1467 | 1.1534 |
- EUR/USD posted slight losses in the Asian session but has recovered in European trade
- 1.1278 was tested earlier in support and is a weak line
- There is resistance at 1.1376
Further levels in both directions:
- Below: 1.1278, 1.1150 and 1.1054
- Above: 1.1376, 1.1467 and 1.1534
- Current range: 1.1278 to 1.1376
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged on Monday, consistent with the lack of movement from EUR/USD. Currently, short positions have a strong majority (65%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.
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