EUR/USD – Euro Gaining Ground Ahead of ECB Announcement

EUR/USD has posted slight gains in the Thursday session. Currently, the pair is trading at 1.1960, up 0.31% on the day. On the release front, German Industrial Production came in at a flat 0.0%, shy of the estimate of 0.5%. Later in the day, the ECB releases its monthly statement, followed by a press conference with ECB President Mario Draghi. In the US, the key event is Unemployment Claims, which is expected to jump to 245 thousand.

The euro continues to trade at high levels, and is within striking distance of the symbolic 1.20 level. The euro has risen 13% against the dollar in 2017, and the trend could continue if the ECB decides to withdraw or taper its current quantitative easing (QE) program, in which the ECB makes monthly asset purchases of EUR 60 billion/month. The QE scheme is scheduled to terminate in December, and the ECB is yet to determine what happens next. Policymakers must weigh competing interests – Germany would like nothing more than the ECB to simply exit the program, which was brought in as an emergency measure to begin with. However, other eurozone members, which are not enjoying German-style growth, favor a gradual tapering of the program, perhaps lowering monthly asset purchases from EUR 60 billion to EUR 45 billion. Analysts are not expecting any announcements regarding QE at the Thursday meeting, although Mario Draghi has surprised the markets in his press conferences more than once. The exchange rate has also become a factor, as a stronger euro is equivalent to a raise in interest rates and has resulted in monetary tightening even without the ECB taking any action. In determining what course of action to take, ECB policymakers must wrestle with a dilemma which the Federal Reserve and other central banks are also struggling with – is tighter monetary policy warranted when the economy has improved, but inflation is mired at low levels? The markets will be dissecting the rate statement and Draghi’s follow-up comments, and any hints about a change in policy could trigger significant movement from the euro.

It’s been a disappointing week for German industrial numbers. Factory Orders declined 0.7%, well off the forecast of a 0.2% gain. This marked a 3-month low. On Thursday, German Industrial Production followed suit, as the reading of 0.0% missed the estimate of 0.5%. The unexpectedly weak readings come as a surprise, as the German economy has looked strong in 2017, and has been an important factor in the improvement in the eurozone economy. Global demand, which had been very strong in the first half of 2017, is showing signs of softening, and this could have a negative impact on the manufacturing sectors in Germany and throughout the eurozone. Germany releases Trade Balance on Friday, with the markets braced for a drop in the surplus for July.

EUR/USD Fundamentals

Thursday (September 7)

• 2:00 German Industrial Production. Estimate 0.5%. Actual 0.0%
• 2:45 French Trade Balance. Estimate -4.5B. Actual -6.0B
• 5:00 Eurozone Revised GDP. Estimate 0.6%
• Tentative – Spanish 10-y Bond Auction
• Tentative – French 10-y Bond Auction
• 7:45 ECB Minimum Bid Rate. Estimate 0.00%
• 8:30 ECB Press Conference
• 8:30 US Unemployment Claims. Estimate 245K
• 8:30 US Revised Nonfarm Productivity. Estimate 1.3%
• 8:30 US Revised Unit Labor Costs. Estimate 0.3%
• 10:00 US IBD/TIPP Economic Optimism. Estimate 53.1
• 10:30 US Natural Gas Storage. Estimate 63B
• 11:00 US Crude Oil Inventories. Estimate 4.1M
• 19:00 US FOMC Member William Dudley Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, September 7, 2017

EUR/USD Thursday, September 7 at 5:00 EDT

Open: 1.1918 High: 1.1958 Low: 1.1914 Close: 1.1960

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted slight gains in European trade

• 1.1876 is providing support
• 1.1996 is the next resistance line

Further levels in both directions:

• Below: 1.1876, 1.1712, 1.1616 and 1.1509
• Above: 1.1996, 1.2108 and 1.2221
• Current range: 1.1876 to 1.1996

OANDA’s Open Positions Ratio

EUR/USD ratio remains unchanged this week, reflecting little movement from EUR/USD. Currently, long positions have a majority (61%), indicative of EUR/USD continuing to move higher.

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