EUR/USD – Euro Edges Higher After Fed Minutes

EUR/USD has rebounded in the Thursday session and has posted gains. Currently, the pair is trading at 1.1719, up 0.19% on the day. On the release front, Germany Final GDP dropped to 0.3%, matching the estimate. GfK Consumer Climate ticked lower to 10.7, just shy of the forecast of 10.8 points. Next up is the ECB will publish the minutes of its April policy meeting. In the US, unemployment claims is expected to tick lower to 220 thousand, while Existing Home Sales is forecast to drop to 5.56 million. On Friday, Germany releases Ifo Business Climate. The US will publish durable goods orders as well as consumer confidence.

The Federal Reserve minutes from the May meeting were somewhat hawkish in tone, but the dollar has responded with losses on Thursday. In the rate statement, some Fed policymakers said they favored removing the phrase that “the stance of monetary policy remains accommodative”. Not surprisingly, the minutes didn’t shed light on the Fed’s plans, saying that another rate hike would occur “soon”, on the assumption that the US economy continues to perform as expected. Still, a quarter-point rate hike in August is virtually a given, with the CME Group setting the odds of a hike at 95 percent. This would mark a second hike in 2018. After that? The Fed projection remains at three rates hikes in 2018, but some analysts are predicting four increases this year.

Earlier this week, there seemed to be some positive momentum regarding the US-China trade talks. However, President Trump voiced skepticism over progress in the negotiations, saying he was ‘not really’ satisfied with the results. Trump’s comments have confused the markets, as Treasury Secretary Steven Mnuchin declared on the weekend that the trade spat was ‘on hold’. The remarks spooked Asian and European stock markets on Wednesday. Investor risk appetite has also waned as there is uncertainty whether North Korean leader Kim Jong-un will meet with President Trump next month. On Tuesday, Trump acknowledged that there was a ‘substantial’ chance that the summit planned with Kim in Singapore on June 12 would not take place.

PMI reports disappointed on Wednesday and the euro responded with losses, as the currency dipped below the 1.17 line for the first time since mid-November. Investors are particularly concerned that both German and eurozone manufacturing PMIs dropped for a fifth straight month. German Manufacturing PMI posted its weakest gain in 16 months, while the eurozone indicator posted its worst reading in 18 months. These numbers, while certainly disappointing, should not cause any alarm, as the PMIs continue to indicate expansion in the services and manufacturing sectors. Still, the fact that growth was softer than expected could give ECB policymakers reason to re-evaluate the planned wind-up of its stimulus program in September.

  Risks Abound

EUR/USD Fundamentals

Thursday (May 24)

• 2:00 German Final GDP. Estimate 0.3%. Actual 0.3%
• 2:00 German GfK Consumer Climate. Estimate 10.8. Actual 10.7
• 4:00 ECB Financial Stability Review
• 4:15 US FOMC Member William Dudley Speaks
• All Day – Eurogroup Meetings
• 7:30 ECB Monetary Policy Meeting Accounts
• 8:30 US Unemployment Claims. Estimate 220K
• 9:00 Belgian NBB Business Climate. Estimate 0.6
• 9:00 US HPI. Estimate 0.5%
• 10:00 US Existing Home Sales. Estimate 5.56M
• 10:30 US Natural Gas Storage. Estimate 92B
• 10:35 US FOMC Member Rafael Bostic Speaks

Friday (May 25)

• 4:00 German Ifo Business Climate. Estimate 102.0
• All Day – ECOFIN Meetings
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate -1.3%
• 9:20 US Fed Chair Powell Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.8
• 10:00 US Revised UoM Inflation Expectations
• 11:45 US FOMC Member Rafael Bostic Speaks

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, May 24, 2018

EUR/USD for May 24 at 7:55 DST

Open: 1.1697 High: 1.1746 Low: 1.1691 Close: 1.1719

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted gains in European trade

• 1.1718 has switched to a support role. It is a weak line
• 1.1809 is the next resistance line

Further levels in both directions:

• Below: 1.1718, 1.1613, 1.1448 and 1.1313
• Above: 1.18o9, 1.1915 and 1.2025
• Current range: 1.1718 to 1.1809

OANDA’s Open Positions Ratio

EUR/USD ratio is showing gains towards long positions. Currently, long positions have a majority (59%), indicative of trader bias towards EUR/USD reversing directions and moving higher.

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.