EUR/USD – Euro Rises to 3-Week High on Talk of Stimulus Wind-Up

EUR/USD has posted gains in the Thursday session. Currently, the pair is trading at 1.1762, down 0.31% on the day. On the release front, German Factory Orders plunged 2.5%, missing the estimate of 0.7%. In the eurozone, Revised GDP dipped to 0.4%, matching the estimate. In the U.S, unemployment claims is expected to edge higher to 223 thousand.

After years of stimulus to boost the eurozone economy, ECB policymakers are focused on the question of whether it is time to wind up the bank’s bond purchase program. The ECB currently buys EUR 30 billion each month, and the scheme is scheduled to end in September. The bank has extended the program in the past, but stronger economic conditions have strengthened the case to finally end stimulus. The ECB has not formally discussed the issue, leaving the markets to hunt for any clues about the bank’s plans. On Wednesday, ECB chief economist Peter Praet said that the ECB would commence discussing the issue next week, when the Governing Council meets in Riga, Latvia. Many policymakers favor a gradual reduction in stimulus over several months, rather than completely turning off the tap in September. If the ECB makes any announcements regarding further tapering, we could see some strong movement from EUR/USD.

Meetings between G-7 leaders are often a chance to catch up with friends and hold a photo-op, but this year’s summit could be explosive, with plenty of bad will between six of the members and President Trump. The reason? The renewal of the tariff spat, courtesy of the U.S slapping aluminum and steel tariffs on the European Union and Canada. Last week, finance ministers from six members of the G-7 were united in their criticism of US Treasury Secretary Steve Mnuchin over the brewing trade war. Will we see a higher profile, repeat performance at this meeting? Canada and Mexico have already announced retaliatory duties on U.S products. The escalating trade battle is sure to dominate the summit, and if the leaders fail to resolve matters, the result could be a nasty trade war between the U.S and its major trading partners.

  US equity markets defy gravity.

EUR/USD Fundamentals

Thursday (June 7)

• 2:00 German Factory Orders. Estimate 0.7%. Actual -2.5%
• 2:45 French Trade Balance. Estimate -5.1B. Actual -5.0B
• 4:00 Italian Retail Sales. Estimate 0.2%. Actual -0.7%
• 4:50 Spanish 10-year Bond Auction. Actual 1.41/2.2
• 5:00 Eurozone Revised GDP. Estimate 0.4%. Actual 0.4%
• 5:03 French 10-year Bond Auction. Actual 0.90/1.9
• 8:30 US Unemployment Claims. Estimate 223K
• Tentative – US IBD/TIPP Economic Optimism. Estimate 54.2
• 10:30 US Natural Gas Storage. Estimate 87B
• 15:00 US Consumer Credit. Estimate 13.9B

Friday (June 8)

• 2:00 German Industrial Production. Estimate 0.4%
• 2:00 German Trade Balance. Estimate 20.3B
• Day 1 – G7 Meetings

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, June 7, 2018

EUR/USD for June 7 at 5:30 DST

Open: 1.1799 High: 1.1811 Low: 1.1759 Close: 1.1762

EUR/USD Technical

EUR/USD has posted small gains in the Asian and European sessions

• 1.1809 has switched to a support role after gains by EUR/USD on Thursday
• 1.1915 is the next resistance line

Further levels in both directions:

• Below: 1.1809, 1.1718, 1.1613 and 1.1448
• Above: 1.1915, 1.1996 and 1.2154
• Current range: 1.1915 to 1.1996

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement this week. Currently, long positions have a majority (59%), indicative of trader bias towards EUR/USD continuing to climb to higher 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.