EUR/USD – Euro Punches Past 1.13 as ECB Stays on Sidelines

The euro is unchanged on Friday, as EUR/USD is trading at 1.1270. On the release front, it’s a light day, with no major events in the Eurozone or the US. Germany’s trade surplus dropped to EUR 19.4 billion, short of the forecast of EUR 21.2 billion. Eurozone finance ministers will hold a meeting in Brussels. In the US, the sole release is Wholesale Inventories, which is expected to post a small gain of 0.1%. With a Fed rate hike again on the agenda, the markets will be listening closely to FOMC member Eric Rosengren, who will speak at an event in Boston.

EUR/USD showed some strength on Thursday, as the pair climbed above the 1.13 level for the first time in two weeks, before retracting. The euro reacted positively after the ECB maintained interest rates and said it had no plans to extend its asset-purchase program beyond March 2017. The interest rate decision was widely expected, but some analysts had expected the bank to extend the QE program or at least hint at its expansion. The ECB statement added that it expected the economy to grow at a “moderate, steady pace” and projected that inflation, which is far below the bank’s target, would increase. ECB President Mario Draghi didn’t have much to add at a follow-up press conference, but his comments about Brexit seem to say that the bark is worse than the bite – despite all the market noise, the ECB expects the impact on Eurozone GDP to amount to just 0.1% in 2017 and 2018.

Back in August, Fed chair Janet Yellen said that the case in favor of a rate hike had improved, given stronger US data. Ever since that speech in Jackson Hole, the markets have been fixated on the possibility of a rate hike prior to the end of 2016. However, a spate of weak US numbers in the past week has lowered the likelihood of a move by the Fed. The CME FedWatch Tool is showing slim odds for a September move (18%), while a move in December is more likely (40%). Although the US labor market remains close to capacity, many FOMC members will be reluctant to approve a rate hike based solely on strong employment numbers. Consumer spending remains a concern, but the main sticking point is weak inflation levels, which will likely weaken even further if the Fed raises rates. Barring any spectacular data in the next few weeks, it appears a safe bet that the Fed will leave rates alone in September and revisit the rate issue in December.

EUR/USD Fundamentals

Friday (September 9)

• 6:00 German Trade Balance. Estimate 21.2B. Actual 19.4B
• 6:45 French Government Budget Balance. Estimate -80.8B
• 6:45 French Industrial Production. Estimate +0.2%. Actual -0.6%
• All Day – Eurogroup Meetings
• 11:45 US FOMC Eric Rosengren Speaks
• 14:00 US Wholesale Inventories. Estimate 0.1%

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, September 9, 2016

EUR/USD September 9 at 8:40 GMT

Open: 1.1268 High: 1.1285 Low: 1.1261 Close: 1.1271

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• 1.1278 remains under pressure. This line was tested in resistance earlier
• 1.1150 is providing strong support

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight movement towards short positions. Currently, short positions have a significant majority (60%), indicative of trader bias towards EUR/USD breaking out and moving to lower ground.

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.