EUR/USD – Euro Unchanged, US GDP Next

EUR/USD is flat on Friday, as the pair trades at 1.1160 in the European session. On the release front, it’s a very quiet day. German markets are closed for a holiday and there are no Eurozone releases on the schedule. The US will release Final GDP for the fourth quarter, with the estimate standing at 1.0%.

Germany, the locomotive of the Eurozone, released a host of economic indicators this week. German PMI were mixed, pointing to moderate expansion in the services sector, but almost no growth in the manufacturing industry, which has been hard-hit by the Chinese slowdown. Ifo Business Climate improved to 106.7 points, beating expectations. ZEW Economic Sentiment improved to 4.3 points, but this was well short of the estimate of 6.3 points. German Consumer Climate edged lower to 9.4 points, within expectations. As well, the ECB announced its LTRO (Long Term Refinancing Option) on Thursday. This lending program aims to bolster the economy by increasing bank lending to the real economy. The actual take-up by European banks was a disappointing EUR 7.3 billion, well short of the forecast of EUR 24.3 billion.

US durable reports in February pointed to a manufacturing sector which continues to struggle. Core Durable Goods Orders posted a decline of 1.0%, well short of the forecast of a 0.2% drop. This marked the indicator’s third decline in four months. Durable Goods Orders was even worse, with a reading of -2.8%, slightly above the estimate of -3.0%. This slowdown is reflective of weak global demand, which has had a strong negative impact on the manufacturing sectors of developed economies worldwide, including the US.

The euro has posted sharp losses this week, in response to a flurry of hawkish statements from Federal Reserve officials. Last week’s Fed policy statement appeared to rule out any imminent rate hikes, but since then a host of Fed members have publicly expressed support for a rate hike as early as April. On Monday, John Williams, president of the San Francisco Fed, said that the Fed could raise rates in April and June if economic conditions improve. Although the dot plot (an FOMC projection of rate hikes) was lowered at the March meeting, he insisted that the Fed had not changed its path of rate hikes. His comments were echoed by Atlanta Fed Dennis Lockhart, who also said that an April rate move was a clear possibility. There was further support for rate hikes from two other Fed presidents, Patrick Harker and James Bullard. Harker said that given the strong economy, the Fed should consider raising interest rates as early as the April meeting, adding that he favored at least three rate hikes during the year. On Wednesday, Bullard said that with the US unemployment rate at very low levels, the Fed could be forced to raise rates sooner rather than later. Given these statements, traders should treat an April move by the Fed as a reasonable possibility, with US employment and inflation numbers having a huge say on the Fed’s decision.

EUR/USD Fundamentals

Friday (March 25)

• 12:30 US Final GDP. Estimate 1.0%
• 12:30 US Final GDP Price Index. Estimate 0.9%

*Key events are in bold

*All release times are GMT

EUR/USD for Friday, March 25, 2016

EUR/USD March 25 at 8:15 GMT

Open: 1.1164 Low: 1.1152 High: 1.1169 Close: 1.1162

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• 1.1087 is providing support
• 1.1172 has switched to a resistance role. It is a weak line and could see further action during the day

Further levels in both directions:

• Below: 1.1087, 1.0941 and 1.0847
• Above: 1.1172, 1.1278, 1.1387 and 1.1495
• Current range: 1.1087 to 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (58%), which is indicative of strong trader bias towards EUR/USD dropping to lower levels.

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.