EUR/USD – Euro at 1.09, Markets Eye Eurozone CPI

EUR/USD has reversed directions on Friday and posted slight losses. In the European session, the pair is trading at the 1.09 line. On the release front, it’s an unusually busy day, so we could see some further movement from the pair. German Retail Sales disappointed with a reading of -0.2%. The markets are awaiting Eurozone CPI, with the estimate standing at 0.4%. In the US, today’s key event is Advance GDP for the fourth quarter, which is expected to show a gain of 0.8%. This forecast is much softer than the Final GDP reading for Q3, which posted an impressive gain of 2.0%.

As widely expected, the Federal Reserve stayed the course and maintained the benchmark rate at 0.25%. The Fed statement was dovish in tone, as policymakers noted that there are soft spots in the economy, such as consumer spending and exports. The inflation picture remains problematic, with the Fed saying that inflation levels will remain low, and may not reach the target of 2.0% until 2018. At the same time, the Fed emphasized that the US labor market remains strong. Will we see another rate hike in March? The Fed has not provided any strong hints on its next move, so the markets will have to show some patience. Given the Fed’s continuing concerns about a lack of inflation, it’s hard to foresee another rate hike in March absent a strong improvement in key US indicators. On the release front, US durable goods reports were dismal in December. Durable Goods dropped 1.2%, while Core Durables plunged 5.1%, well off the estimate of a 0.6% decline. These poor numbers underscore ongoing weakness in the US manufacturing sector, which has not improved despite positive economic conditions. There was more bad news on the housing front, as Pending Home Sales posted a negligible gain of 0.1%, well off the estimate of 1.0%.

The Eurozone economy continues to struggle, by weak inflation and low growth. Germany, the bloc’s number one economy, is also in showing signs of weakness. German Retail Sales, a key gauge of consumer spending, declined by 0.2% in December, marking a second decline in the past three months. The markets will get a  look at Eurozone inflation levels later on Friday, with the release of Eurozone CPI reports. The ECB will be closely monitoring the latest inflation figures. The ECB opted not to increase its quantitative easing program earlier this month, but Mario Draghi has put the markets on notice that he “reserves the right” to act in March if necessary. Disappointing readings from these inflation indicators could increase speculation that the ECB will increase easing in March, and this could weaken the euro.

Friday (Jan. 29)

• 1:30 French Preliminary GDP. Estimate -0.2%. Actual 0.2%
• 2:00 German Retail Sales. Estimate 0.3%. Actual -0.2%
• 2:45 French Consumer Spending. Estimate 0.6%. Actual 0.7%
• 2:45 French Preliminary CPI. Estimate 0.2%. Actual- 0.3%
• 3:00 Spanish Flash CPI. Estimate -0.3%. Actual 0.1%
• 3:00 Spanish Flash GDP. Estimate 0.8%. Actual 0.8%
• 4:00 Eurozone M3 Money Supply. Estimate 5.2%. Actual 4.7%
• 4:00 Eurozone Private Loans. Estimate 1.5%. Actual 1.4%
• 5:00 Eurozone CPI Flash Estimate. Estimate 0.4%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 0.9%
• 8:30 US Advance GDP. Estimate 0.8%
• 8:30 US Advance GDP Price Index. Estimate 1.2%
• 8:30 US Employment Cost Index. Estimate 0.6%
• 8:30 US Goods Trade Balance. Estimate -60.0B
• 9:45 US Chicago PMI. Estimate 45.4 points
• 10:00 US Revised UoM Consumer Sentiment. Estimate 93.1 points
• 10:00 US Revised UoM Inflation Expectations

Upcoming Key Events

Monday (Feb. 1)

• 10:00 US ISM Manufacturing PMI

*Key events are in bold

*All release times are EST

EUR/USD for Friday, January 29, 2016

EUR/USD January 29 at 4:55 EST

Open: 1.0935 Low: 1.0882 High: 1.0949 Close: 1.0902

EUR/USD Technical

• EUR/USD posted losses late in the Asian session and is choppy in European trade
• 1.0847 continues to provide support
• There is resistance at 1.0941
• Current range: 1.0847 to 1.0941

Further levels in both directions:

• Below: 1.0847, 1.0732, 1.0659 and 1.0537
• Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD remains unchanged, reflective of the lack of movement from the pair. Currently, short positions have a majority of positions (58%). This points to trader bias towards the pair moving lower.

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.