EUR/USD – Euro pauses after slide, ECB meeting looms

EUR/USD has steadied on Thursday, after strong losses in the Wednesday session. Currently, the pair is trading at 1.1411, up 0.17% on the day. On the release front, German Ifo Business Climate dipped to 102.8, a 3-month low. This missed the estimate of 103.1 points. Later in the day, the ECB holds a policy meeting, followed by a press conference with ECB head Mario Draghi. In the U.S, the markets are braced for mixed news from durable good orders. Core durable goods orders are expected to improve to 0.5%, while durable goods orders are forecast to plunge to -1.3%, after a strong gain of 4.5% in the previous release. Unemployment claims are expected to rise to 214 thousand. On Friday, Germany releases GfK Consumer Climate and the U.S publishes Advance GDP and UoM Consumer Sentiment.

All eyes are on the ECB, which holds a policy meeting later on Thursday. The bank is expected to hold the course with interest rate levels, which have been pegged at a flat 0.00% for almost three years. Despite a host of geopolitical hotspots, both in Europe and abroad, the ECB remains on track to end its massive stimulus program in December. Trouble spots include the spike in Italian bond yields, the Brexit impasse and the U.S-China trade war. This has taken a toll on the equity markets, as well as on the euro, which is down close to 1 percent this week. The eurozone economy remains in good shape, but is vulnerable to these negative developments, and investors will be closely attuned to statements accompanying the rate decision, as well as Draghi’s follow-up press conference.

With the ECB expected to make good on its pledge to wind up stimulus in December, the markets are now looking ahead to 2019, focusing on the timing of a rate hike. The ECB has adhered to the line that rates will stay on hold “through the summer of 2019”. However, it’s unlikely that policymakers can ignore the issue of a rate hike, which would be a historic move, as the bank last raised rates in 2011. The head of the Dutch central bank, Klaas Knot, recently said that the ECB will have to initiate discussions over the timing of a rate hike in January. Investors will be keeping a close eye on the ECB, looking for clues as to the timing of a rate hike.

Will ECB meeting be more eventful than expected?

Asia market update : Risk off

Equity rout continues; Yen higher on haven flows

EUR/USD Fundamentals

Thursday (October 25)

• 3:00 Spanish Unemployment Rate. Estimate 14.9%. Actual 14.6%
• 4:00 German Ifo Business Climate. Estimate 103.1. Actual 102.8
• 7:45 ECB Main Refinancing Rate. Estimate 0.00%
• 8:30 ECB Press Conference
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Durable Goods Orders. Estimate -1.3%
• 8:30 US Goods Trade Balance. Estimate -74.9B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.5%
• 8:30 US Unemployment Claims. Estimate 214K
• 10:00 US Pending Home Sales. Estimate -0.1%
• 10:30 US Natural Gas Storage. Estimate 47B
• 12:15 US FOMC Member Clarida Speaks
• 17:30 FOMC Member Mester Speaks

Friday (October 26)

• 2:00 German GfK Consumer Climate. Estimate 10.5
• 8:30 US Advance GDP. Estimate 3.3%
• 8:30 US Advance GDP Price Index. Estimate 2.1%
• 10:00 ECB President Draghi Speaks
• 10:00 US Revised UoM Consumer Sentiment. Estimate 98.9

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, October 25, 2018

EUR/USD for October 25 at 5:50 DST

Open: 1.1392 High: 1.1420 Low: 1.1391 Close: 1.1411

EUR/USD Technical

EUR/USD showed little movement in the Asian session. In European trade, the pair edged higher but then reversed directions and has lost ground

• 1.1300 is providing support
• 1.1434 has weakened in resistance. It could break on Thursday
• Current range: 1.1300 to 1.1434

Further levels in both directions:

• Below: 1.1300, 1.1212 and 1.1120
• Above: 1.1434, 1.1553, 1.1611 and 1.1735

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