EUR/USD – Euro Continues to Drift as Eurozone CPI Matches Forecast

The euro ended the week quietly, and the lack of activity continues in the Monday session. Currently, the pair is trading at 1.1941, up 0.27% on the day. On the release front, Eurozone Final CPI improved to 1.5%, matching the forecast. There are no major US events on the schedule. On Tuesday, Germany releases ZEW Economic Sentiment and the US publishes Building Permits and Housing Starts.

Eurozone economic conditions have been solid in 2017, but inflation levels have been stubbornly low. This has complicated the ECB’s plans to reduce its quantitative easing scheme (QE), although ECB President Mario Draghi has said that the ECB will announce its plans to reduce QE at the October policy meeting. QE is scheduled to end in December, and policymakers will have to balance opposing interests as to what happens next. Germany, with its robust economy, would like to remove stimulus entirely, while less affluent eurozone members want to retain an accommodative monetary policy. We’re likely to see some compromise, in which stimulus is extended into 2018, but will be tapered from its current level of EUR 60 billion/month.

Germany head for the polls on September 24, and Angela Merkel is widely expected to win her fourth term as prime minister. French President Emmanuel Macron, a staunch supporter of a unified Europe, is hoping to work with Merkel and reform the eurozone. Macron’s proposal includes a eurozone finance minister who would be in charge of a eurozone budget. Macron’s call for greater cooperation is linked to Britain’s exit from the EU, which could lead to divisions among the remaining 27 members in the bloc. However, the French ambitious plan will need Germany’s support before it can become a reality. Will Germany embrace the idea? Angela Merkel’s has indicated that she is open to the idea, but Jean-Claude Juckner, head of the European Commission, came out against the plan last week. Juckner said he favored a finance minister for the EU but was against a separate eurozone budget and finance minister. Even if the plan is not adopted, we can expect a Macron-Merkel alliance to take steps which will strengthen Franco-German ties and further unify the eurozone.

EUR/USD Fundamentals

Monday (September 18)

• 4:02 Italian Trade Balance. Estimate 3.89B. Actual 6.56B
• 5:00 Eurozone Final CPI. Estimate 1.5%. Actual 1.5%
• 5:00 Eurozone Final Core CPI. Estimate 1.2%. Actual 1.2%
• 6:00 German Deutsche Bundesbank Monthly Report
• 10:00 US NAHB Housing Market Index. Estimate 67
• 16:00 US TIC Long-Term Purchases. Estimate 42.3B

Tuesday (September 19)

• 4:00 Eurozone Current Account. Estimate 22.3B
• 5:00 German ZEW Economic Sentiment. Estimate 12.3
• 5:00 Eurozone ZEW Economic Sentiment. Estimate 32.4
• 8:30 US Building Permits. Estimate 1.22M
• 8:30 US Current Account. Estimate -113B
• 8:30 US Housing Starts. Estimate 1.18M
• 8:30 US Import Prices. Estimate 0.4%

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, September 18, 2017

EUR/USD Monday, September 18 at 6:50 EDT

Open: 1.1921 High: 1.1956 Low: 1.1915 Close: 1.1951

EUR/USD Technical

EUR/USD edged higher in the Asian session and is showing limited movement in European trade

• 1.1876 is providing support
• 1.1996 is the next resistance line

Further levels in both directions:

• Below: 1.1876, 1.1712 and 1.1611
• Above: 1.1996, 1.2018, 1.2108 and 1.2221
• Current range: 1.1876 to 1.1996

OANDA’s Open Positions Ratio

In the Monday session, EUR/USD ratio is showing short positions with a majority (64%), indicative of EUR/USD continuing to move higher.

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