EUR/USD – Euro Rally Pauses, US Consumer Confidence Next

EUR/USD is unchanged in the Friday session, as the pair trades at 1.0770. On the release front, it’s a quiet end to the week. Eurozone Trade Balance slipped to EUR 15.7 billion, well short of the estimate of EUR 22.3 billion. In the US, today’s highlight is US Preliminary UoM Consumer Sentiment, which is expected to improve to 97.1 points.

There were no raised eyebrows when the Federal Reserve raised rates by a quarter-point on Wednesday, as the markets had priced a rate hike at over 90%. The rate hike, the second in just three months, raised the raised the benchmark lending rate to a 0.75%-1% range. What was not expected, however, was the sharp drop of the dollar against its major rivals. This was largely due to disappointment with the Fed, which sent a more dovish message than the markets wanted to hear. Leading up the rate announcement, there had been speculation that a red-hot US economy would propel the Fed to accelerate its pace of monetary tightening, with possibly four rate hikes this year. Instead, Fed Chair Janet Yellen reiterated that further rate hikes would be “gradual” and left its “dot plot” unchanged, with a projection for three rate hikes in 2017. As well, the US dollar may have lost ground due to traders and investors acting on “buy on rumor, sell on fact”. This large-scale selling of US dollars after the Fed hike has sent the US dollar broadly lower.

European governments can breathe a sigh of relief following the results of the election in the Netherlands. The centre-right coalition of Prime Minister Mark Rutte won the most votes, handily defeating the anti-EU Freedom Party, headed by Geert Wilders. The election was closely watched across Europe, as it was viewed as a bellwether of populist sentiment on the continent. Leaders in France and Germany, who are also facing tight races due to rising anti-EU sentiment, are hopeful that they can copy Rutte’s recipe for electoral success. The election results have helped push the euro to its highest level February 5.

One-Minute Round Up: A ‘Less Hawkish’ Fed Has the Market Rethinking Strategy

EUR/USD Fundamentals

Friday (March 17)

• 5:00 Italian Trade Balance. Estimate 3.45B. Actual -0.57B
• 6:00 Eurozone Trade Balance. Estimate 22.3B. Actual 15.7B
• Day 1 – G-20 Meetings
• 9:15 US Capacity Utilization Rate. Estimate 75.5%
• 9:15 US Industrial Production. Estimate 0.3%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 97.1
• 10:00 US CB Leading Index. Estimate 0.4%
• 10:00 US Preliminary U0M Inflation Expectations
• Tentative – US Labor Market Conditions Index

*All release times are EST

*Key events are in bold

EUR/USD for Friday, March 17, 2017

EUR/USD March 17 at 6:50 EST

Open: 1.0771 High: 1.0782 Low: 1.0753 Close: 1.0774

EUR/USD Technical

EUR/USD was flat in the Asian session and is choppy in European trade

• 1.0708 is providing support
• 1.0873 is the next resistance line

Further levels in both directions:

• Below: 1.0708, 1.0616 and 1.0506
• Above: 1.0873, 1.0985 and 1.1097
• Current range: 1.0708 to 1.0873

OANDA’s Open Positions Ratio

EUR/USD ratio continues to show gains in short positions. Currently, short positions have a majority (60%), indicative of trader bias towards EUR/USD breaking out and heading 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.