EUR/USD – Euro Edges Lower on Weak German Economic Sentiment

The euro has posted slight losses on Tuesday, as EUR/USD is trading at 1.1220. On the release front, German ZEW Economic Sentiment posted a negligible gain of 0.5 points, well off the forecast of 2.8 points. Eurozone Economic Sentiment improved to 5.4 points, but this too was short of the estimate of 6.7 points. German Final CPI dropped to 0.0%, matching the forecast. In the US, it’s another quiet day, with no key events on the schedule.

Eurozone confidence indicators were a disappointment on Tuesday. German ZEW Economic Sentiment remained steady at 0.5 points, falling well short of expectations for a second straight month. The Eurozone release improved to 5.7 points, but this was below expectations. The German release is especially disappointing, as weak confidence levels in the Eurozone’s largest economy is bound to alarm the markets and could weigh on the euro. German inflation numbers were a mix, as Final CPI dropped to 0.0% in August, down from 0.3% a month earlier. However, WPI came in at 0.1%, better than the forecast of -0.7%.

With no major US releases until Thursday, the markets have been paying even closer attention to recent comments from Federal Reserve policymakers. On Monday, FOMC member Lael Brainard sounded cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates. This dovish message was in marked contrast to remarks from FOMC member Eric Rosengren on Friday, who came out in support of a rate hike, without providing a timeline. Rosengren said that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. These mixed messages certainly haven’t clarified matters, leaving markets players in the dark as to the Fed’s monetary plans. However, they have led to plenty of movement in the odds of a rate hike, which moved higher after Rosengren’s speech, only to drop following Brainard’s comments. The likelihood of a September hike has dipped to 15%, while the odds of a December rate hike are down to 45%. The markets will have few fundamental cues to work with until Thursday and Friday, when the US will release retail sales, CPI and consumer confidence numbers. If these numbers are stronger than expected, the odds of a rate hike next week will move higher, and the dollar could make headway against its rivals.

EUR/USD Fundamentals

Tuesday (September 13)

• 6:00 German Final CPI. Estimate 0.0%. Actual 0.0%
• 6:00 German WPI. Estimate +0.1%. Actual -0.7%
• 8:00 Italian Industrial Production. Estimate 0.2%. Actual 0.4%
• 9:00 ECB President Mario Draghi Speaks
• 9:00 German ZEW Economic Sentiment. Estimate 2.8. Actual 0.5
• 9:00 Eurozone ZEW Economic Sentiment. Estimate 6.7. Actual 5.4
• 9:00 Eurozone Employment Change. Estimate 0.2%. Actual 0.4%
• 10:00 US NFIB Small Business Index. Estimate 94.9
• 17:01 30-year Bond Auction
• 18:00 US Federal Budget Balance. Estimate -98.0B

*All release times are EDT

* Key events are in bold

EUR/USD for Tuesday, September 13, 2016

EUR/USD September 13 at 8:50 GMT

Open: 1.1241 High: 1.1241 Low: 1.1216 Close: 1.1220

EUR/USD Technical

• EUR/USD is showing limited movement in the Asian and European sessions
• 1.1278 is an immediate resistance line
• 1.1150 is providing support

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.1278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Tuesday, consistent with the lack of movement from EUR/USD. Currently, short positions have a significant majority (59%), indicative of trader bias towards EUR/USD moving to lower ground.

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.