EUR/USD – Euro Edges Lower, US GDP Next

The euro remains quiet on Friday, as EUR/USD is trading at the 1.10 line in the European session. It’s a busy day on the release front. Eurozone inflation numbers remain soft, as French and Spanish CPI reports missed their estimates. In the US, there are two key events on the schedule – Preliminary GDP and UoM Consumer Sentiment. With the GDP estimate standing at just 0.4%, we could see some strong movement in the currency markets in the North American session.

Weak inflation levels continue to hobble the Eurozone, as underscored by soft numbers out of France and Spain on Friday. French CPI showed a small gain of 0.2%, while Spanish CPI slid 0.8%, its sharpest drop in five months. Both indicators missed expectations, and could foreshadow a weak Eurozone CPI report, which will be released on Monday. If this key indicator disappoints the markets, Mario Draghi will find himself under increased pressure to take monetary action at the ECB policy meeting in March. Possible monetary moves include adopting negative interest rates (a step recently taken by the BoJ) as well as increasing the current quantitative easing scheme, which currently involves purchasing assets at 60 billion euros/mth. Either of these moves would likely push the euro lower, so traders should keep a close eye on the upcoming Eurozone CPI release.

The US manufacturing sector has struggled, but there was positive news on Thursday, as durable goods reports posted excellent gains in January. Core Durable Goods rose 1.8%, crushing the estimate of 0.2%. This marked the key indicator’s strongest showing since March 2014. Durable Goods Orders followed suit with a sharp rise of 4.9%, rebounding from the previous reading of -5.1%. This was stronger than the estimate of 3.0%. These excellent figures point to stronger domestic consumption, at a time when the US economy is grappling with a downturn in global demand, which has taken its toll on the export and manufacturing sectors. A strong US dollar, which has posted broad gains in recent months, has only exacerbated the situation. The good news was tempered by a weak employment report, as Unemployment Claims rose to 272 thousand, compared to the previous release of 262 thousand.

USD/JPY Fundamentals

Friday (Feb. 26)

• 2:45 French Consumer Spending. Estimate 0.6%. Actual 0.6%
• 2:45 French Preliminary CPI. Estimate 0.2%. Actual 0.4%
• 3:00 Spanish Flash CPI. Estimate -0.5%. Actual -0.8%
• Tentative – Italian 10-year Bond Auction
• 8:30 US Preliminary GDP. Estimate 0.4%
• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Goods Trade Balance. Estimate -61B
• 8:30 US Personal Spending. Estimate 0.3%
• 8:30 US Personal Income. Estimate 0.4%
• 8:30 US Preliminary GDP Price Index. Estimate 0.8%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 91.1 points
• 10:00 US Revised UoM Inflation Expectations
• 10:15 US FOMC Member Jerome Powell Speaks
• 13:30 US FOMC Member Lael Brainard Speaks

*Key events are in bold

*All release times are EST

EUR/USD for Friday, February 26, 2016

EUR/USD February 26 at 5:05 EST

Open: 1.1023 Low: 1.1005 High: 1.1068 Close: 1.1014

EUR/USD Technical

• EUR/USD posted gains in the Asian session but has given up these gains in European trade
• There is resistance at 1.1087
• 10941 is providing support
• Current range: 1.0941 to 1.1087

Further levels in both directions:

• Below: 1.0941, 1.0847 and 1.0708
• Above: 1.1087, 1.1172, 1.1278 and 1.1349

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement, consistent with the lack of significant activity from EUR/USD. Short and long positions are close to an even split. This points to a lack of trader bias as to what direction the pair will take next.

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.