EUR/USD – Euro Steady at 1.10 as Eurozone Inflation Meets Expectations

EUR/USD is quiet on Friday as the pair trades at the 1.10 line in the European session. It’s a busy day in the Eurozone as we wind up the trading week. German Retail Sales disappointed with a flat reading of 0.0%, missing the estimate of 0.4%. Eurozone Core CPI and CPI were within expectations, but point to inflation levels that are well below the ECB’s target level of 2%. There was some good news as well, as the Eurozone Unemployment Rate dipped to 10.8%, better than the estimate of 11.0%. In the US, there are two key releases later on Friday – US Employment Cost Index and the UoM Consumer Sentiment Index.

On Thursday, US Advance GDP for the third quarter posted a gain of 1.5%. This was a much softer reading than the Final GDP in Q2 of 3.9%, but was very close to the forecast of 1.6%. Unemployment Claims beat the estimate for a fourth straight week, coming in at 260 thousand. The estimate stood at 264 thousand.

It’s been a rough couple of weeks for the euro, which has plunged almost 500 points since mid-October. EUR/USD dropped 150 points immediately after the Federal Reserve policy statement. The markets had lowered expectations about a rate hike before the end of the year, but the Fed statement revived the possibility of a December hike, stating that it would raise rates when there is further improvement in the US labor market and when inflation rises closer to the 2% target. The Fed provided some clarity in the following excerpt, something which has been sorely missing from previous statements:

“In determining whether it will be appropriate to raise the target range at its next meeting, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation” [emphasis mine]

The next Fed meeting is mid-December, and the markets will be in alert mode for any further hints about a rate hike. As well, key US numbers will be closely monitored, especially employment and inflation data, as the strength of these numbers in the next several weeks will play a critical role in determining whether the Fed will press the rate trigger in December. Still, traders should keep in mind that the markets sometimes overreact to Fed statements or comments from Fed policymakers, and the central bank could easily continue to wait on the sidelines until 2016.

EUR/USD Fundamentals

Friday (Oct. 30)

•  7:00 German Retail Sales. Estimate 0.4%. Actual 0.0%
• 7:45 French Consumer Spending. Estimate 0.2%. Actual 0.0%
• 8:00 Spanish Flash GDP. Estimate 0.9%. Actual 0.8%
• 9:00 Italian Monthly Unemployment Rate. Estimate 11.9%. Actual 11.8%
• 10:00 Eurozone CPI Flash Estimate. Estimate 0.0%. Actual 0.0%
• 10:00 Eurozone Core CPI Flash Estimate. Estimate 0.9%. Actual 1.0%
• 10:00 Eurozone Unemployment Rate. Estimate 11.0%. Actual 10.8%
• 10:00 Italian Preliminary CPI Flash Estimate. Estimate 0.1%. Actual 0.2%
• 12:30 US Employment Cost Index. Estimate 0.6%
• 12:30 US Core PCE Price Index. Estimate 0.2%
• 12:30 US Core Personal Spending. Estimate 0.2%
• 12:30 US Core Personal Income. Estimate 0.2%
• 13:45 US Chicago PMI. Estimate 49.5 points
• 14:00 FOMC Member John Williams Speaks
• 14:00 US Revised UoM Consumer Sentiment. Estimate 92.6 points
• 14:00 US Revised UoM Inflation Expectations

Upcoming Key Events

Monday (Nov. 2)

•  15:00 US ISM Manufacturing PMI. Estimate 50.2 points

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Friday, October 30, 2015

EUR/USD October 30 at 9:55 GMT

EUR/USD 1.1007 H: 1.1020 L: 1.0965

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted marginal gains in the European session.
• 1.10117 continues to alternate between resistance and support. It is back in a support role but is under strong pressure.
• 1.1105 is an immediate resistance line.
• Current range: 1.1017 to 1.1105

Further levels in both directions:

• Below: 1.1017, 1.0941, 1.0847 and 1.0659
• Above: 1.1105, 1.1214 and 1.1296

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to movement towards short positions and currently there is an event split between long and short positions. This indicates a lack of trader bias as to what direction the pair will take.

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.