EUR/USD September 16 – Rangebound As US Manufacturing Numbers Falter

EUR/USD is showing little movement as we begin the new trading week. The pair is trading in the mid-1.33 range in Monday’s North American session. On Friday, US releases ended the week on a sour note, as UoM Consumer Sentiment posted a five-month low. Taking a look at Monday’s events, ECB head Mario Darghi spoke at a conference in Berlin. Euro CPI and Core CPI both matched the market forecasts. Over in the US, Empire State Manufacturing Index dropped sharply. As well, Lawrence Summers announced that he was withdrawing his nomination for head of the US Federal Reserve.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• In the Asian session, EUR/USD was  uneventful, touching, a high of 1.3382 late in the session and consolidating at 1.3368. The pair touched a high of 1.3385 in the European session but has since edged lower.

Current range: 1.3240 to 1.3300.

Further levels in both directions:

• Below: 1.3240, 1.3175, 1.31, 1.3050 and 1.30.
• Above: 1.3325, 1.3450, 1.3520, 1.3590 and 1.37.
• 1.3300 is providing weak resistance.
• 1.3240 is a weak support level. 1.3175 follows.

EUR/USD Fundamentals

• 8:00 ECB President Darghi Spoke. Draghi addressed the SME conference of Bundesverband der Deutschen Industrie eV in Berlin.
• 8:00 Italian Trade Balance. Exp. 4.13B. Actual 5.95B.
• 9:00 Eurozone CPI. Exp. 1.3%. Actual 1.3%.
• 9:00 Eurozone Core CPI. Exp. 1.1%. Actual 1.1%.
• 12:30 US Empire State Manufacturing Index. Exp. 9.2 points, Actual 6.3 points.
• 13:15 US Capacity Utilization Rate. Exp. 77.8%, Actual 77.8%
• 13:15 US Industrial Production. Exp. 0.5%., Actual 0.4%.

* All times are GMT.

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• US data continues to disappoint: US releases have run into trouble, and UoM Consumer Sentiment looked awful on Friday. The key indicator dropped from 80.0 points in July to 76.8 in August, its lowest level since March. This weak figure comes on the heels of weak US retail sales releases on Thursday. The yen has taken advantage of these poor US numbers and has gained about 150 points since the middle of last week. The new week didn’t start out much better, as Empire State Manufacturing Index, an important release, posted another sharp drop in August. The indicator fell from 8.2 points to 6.3 points. This was way off the estimate of 9.2 points. The markets are hoping that the US numbers will get back on track on Tuesday ,with the release of Core CPI, a key event.
• Summers withdraws from Fed race: US Federal Reserve Bernard Bernanke steps down at the end of January, and the race to replace Bernanke has taken a dramatic twist. Former Treasury Secretary Lawrence Summers was considered the leading contender for the prestigious position. Surprisingly, Summers has withdrawn his nomination, leaving Vice Chairman Janet Yellen as the favored candidate. Yellen is considered dovish and may be hesitant when it comes to QE tapering. The dollar responded to the news of Summers’ withdrawal by losing ground against the major currencies.
• Unemployment Claims Drop: US Unemployment Claims dropped on Thursday, but a Department of Labor spokesman said the decrease was due to computer upgrades in two states, which meant that not all claims were processed. Even so, unemployment claims are looking good. The four-week average, which is a less volatile gauge of unemployment claims, dropped to 321,000, its lowest level since 2007. If employment data continues to improve, we could see the Fed press the tapering trigger sooner rather than later.
• Latvia welcomes Draghi: ECB head Mario Draghi was in Latvia on Thursday, where he delivered remarks at the Bank of Latvia’s Economic Conference. The timing of the trip was not coincidental, as the Baltic country is set to join the Eurozone on January 1, 2014. The small country of just 2.4 million will be the 18th member of the zone. Latvia’s economy has been doing well, but public support for adopting the euro has been weak, with fears of rising prices and Eurozone contagion.

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Natural gas prices surge as Ingrid roils Gulf of Mexico

Natural gas prices shot up on Monday after Tropical Storm Ingrid roar ashore in Mexico and threatened to disrupt production in the southwestern Gulf of Mexico before moving further inland.

On the New York Mercantile Exchange, natural gas futures for delivery in October traded at USD3.7370 per million British thermal units during U.S. trading, up 1.62%. 

The October contract settled up 1.07% at USD3.667 per million British thermal units on Friday.
The commodity hit a session low of USD3.628 and a high of USD3.749.

Hurricane Ingrid over the weekend meandered across the southwestern Gulf of Mexico before weakening to a tropical storm as it went ashore in northern Mexico.

Investors viewed the storm as dangerous enough to disrupt natural gas production in the area.
Tropical weather systems often disrupt production by prompting gas rig operators to evacuate offshore facilities.

The Gulf of Mexico is home to 10% of U.S. natural gas production.

Supply data released last week bolstered prices as well.

The U.S. Energy Information Administration said in its weekly report on Thursday that natural gas storage in the U.S. in the week ended Sept. 6 rose by 65 billion cubic feet, below market expectations for an increase of 66 billion cubic feet.

Inventories increased by 27 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 62 billion cubic feet.

Total U.S. natural gas storage stood at 3.253 trillion cubic feet as of last week. Stocks were 172 billion cubic feet less than last year at this time and 46 billion cubic feet above the five-year average of 3.207 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 114 billion cubic feet below the five-year average, following net injections of 49 billion cubic feet. 

Stocks in the Producing Region were 106 billion cubic feet above the five-year average of 993 billion cubic feet after a net injection of 14 billion cubic feet.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in November were down 0.79% and trading at USD106.69 a barrel, while heating oil for October delivery were down 1.00% and trading at USD3.0825 per gallon.

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Dollar broadly lower, Fed in focus

The dollar was lower against the other major currencies on Monday, following news that former U.S. Treasury Secretary Lawrence Summers bowed out of the race to become the next chairman of the Federal Reserve.

During U.S. morning trade, the dollar was down against the yen, withUSD/JPY shedding 0.52% to trade at 98.84.

The dollar weakened across the board after Summers’ withdrew from the running to succeed Ben Bernanke as the next Fed chairman. Summers’ was perceived as being likely to unwind economic stimulus measures more aggressively than his main rival for the post, Janet Yellen.

Investors were also awaiting the outcome of the upcoming Fed policy meeting, which concludes on Wednesday, amid doubts over whether the bank will start unwinding its USD85 billion-a-month bond buying program.

Data released on Monday showed that the Empire State manufacturing index fell to a four-month low of 6.29 in September from a reading of 8.24 in August. Analysts had expected the index to rise to 9.2.

This was offset by a report showing that U.S. industrial production rose 0.4% in August, in line with expectations after remaining flat in July.

Elsewhere, the euro was close to three-week highs against the dollar, with EUR/USD advancing 0.45% to 1.3356.

European Central Bank President Mario Draghi said Monday that the economic recovery in the euro zone remains “fragile” and reiterated that interest rates will remain at current or lower levels for an “extended period”. The comments came during a speech in Berlin.

Separately, data showed that consumer price inflation in the euro zone remained steady at 1.3% on a year-over-year basis in August, unchanged from an initial estimate and in line with expectations.

The pound advanced to eight-month highs against the dollar, withGBP/USD climbing 0.40% to 1.5941.

The dollar was also lower against the Swiss franc, with USD/CHF falling 0.48% to 0.9251.

Elsewhere, the greenback was sharply lower against its Australian, New Zealand and Canadian counterparts, with AUD/USD jumping 1.07% to 0.9344, NZD/USD gaining 0.60% to trade at 0.8182 and USD/CAD down 0.33% to 1.0320.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.47% to 81.29. 

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Forex - EUR/USD gains, dollar drops as Summers bows out of Fed race

The euro firmed against the dollar on Monday after former U.S. Treasury Secretary Larry Summers removed his name from the list of those in the race to replace Ben Bernanke as head of the Federal Reserve.

Summers was seen as more hawkish over other frontrunners including current Fed Vice Chair Janet Yellen, whom markets feel will keep policy loose to prioritize job creation over keeping inflation in a narrow range if nominated.


In U.S. trading on Monday, EUR/USD was up 0.46 % at 1.3358, up from a session low of 1.3340 and off from a high of 1.3385.

The pair was likely to find support at 1.3254, Friday's low, and resistance at 1.3398, the high from Aug. 28.

Summers, viewed by many as President Barack Obama's first choice as head of the Federal Reserve, bowed out of the race over the weekend, and was perceived as being more likely to wind down dollar-weakening economic stimulus measures than Yellen.

On Tuesday, the Fed will open a two-day monetary policy meeting, with many avoiding the dollar on uncertainty as to whether the U.S. central bank will announce plans to begin tapering its USD85 billion monthly bond-buying program, which weakens the dollar by driving down interest rates to spur recovery.

Elsewhere, the Federal Reserve Bank of New York reported earlier that its Empire State manufacturing index fell to a four-month low of 6.29 in September from 8.24 in August, defying analysts' calls for the index to rise to 9.20.

The number weakened the dollar by fueling sentiments that any Fed plan to taper its asset-purchasing program will be very light and gradual, which should keep the greenback soft for the foreseeable future.

Separately, the Federal Reserve reported that U.S. industrial production advanced 0.4% in August after having been unchanged in July, in line with expectations.

The dollar continued to come under pressure after Friday data revealed that the Thomson Reuters/University of Michigan preliminary U.S. consumer sentiment index fell to a six-month low of 76.8 in September from 82.1 in August, worse than expectations for a decline to 82.0. 

Also on Friday, official data showed that U.S. retail sales rose 0.2% in August, missing expectations for a 0.4% rise. 

Core retail sales, excluding automobiles, rose 0.1% last month, short of expectations for a 0.3% gain. 

Meanwhile in Europe, the euro area's on-year inflation rate hit 1.3% in August, in line with expectations.

European Central Bank President Mario Draghi said Monday that the economic recovery in the euro zone remains “fragile” and reiterated that interest rates will remain at current or lower levels for an “extended period.” 

Elsewhere, the euro was up against the pound and up against the yen, with EUR/GBP trading up 0.07% at 0.8380 and EUR/JPY trading up 0.02% at 132.13.

On Tuesday in Europe, the ZEW Institute is to release its closely watched report on German economic sentiment as well as data on economic sentiment in the wider euro zone.

The U.S. is to release data on consumer price inflation.

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