EUR/USD – Lack of eurozone data leaves euro yawning

EUR/USD is steady in the Thursday session, after recording considerable losses on Wednesday. Currently, the pair is trading at 1.1523, up 0.20% on the day. On the release front, there are no major eurozone indicators. German WPI gained 0.4%, matching the estimate. This was the strongest gain in three months. In Brussels, EU leaders are meeting for a second day. In the U.S, Philly Fed Manufacturing Index is expected to dip to 19.4 points, while unemployment claims are forecast to drop to 211 thousand. On Friday, the eurozone releases Current Account and the U.S publishes Existing Home Sales.

One of the hot topics at the EU summit has been Brexit, but the leaders decided not to issue a draft statement on Brexit, due to the impasse in negotiations. The European leaders sounded pessimistic about reaching a deal, unless Theresa May brings fresh proposals to the table. With only five months until Britain departs the EU, the likelihood of a no-deal scenario is very real. France has published a draft bill that allows the government to impose custom inspections and visa requirements on British visitors, in the event that no deal is reached. There has been little progress on the thorny issue of the Irish border. The EU is insisting that it will not sign a withdrawal agreement with Britain, unless there is a backstop which allows Northern Ireland to remain in a customs union with the EU after Brexit. However, the British government is unlikely to agree to such a move, since it would require regulatory barriers within the United Kingdom. In a conciliatory move, Michel Barnier, chief Brexit negotiator for the EU, offered to extend the transition phase by 12 months, which would leave it in place until December 2021. This would give the sides more time to work on the shape of a new customs union as well as outstanding issues. On the European side, the mood over Brussels is so sour that officials are saying that they may not hold a November summit, unless substantial progress is made in the next several weeks.

The Federal Reserve minutes from the September meeting showed that a majority of members want to continue raising interest rates until the U.S economy shows signs of slowing down. However, the duration of a tighter policy remains unclear, as the minutes noted that “there is considerable uncertainty surrounding all estimates of the neutral federal funds rate.” This would likely be around the 3 percent level, which will not be reached until the second half of 2019, as the Fed has indicated it will raise rates three times next year. At the September meeting, the Fed removed the phrase “the stance of monetary policy remains accommodative”, which was considered outdated, given the policy of steady rate hikes. As rates approach the “neutral  rate”, we could see further changes in language at upcoming policy meetings.

Asia market update: a busy session is unfolding

Risk Aversion Lingers

EUR/USD Fundamentals

Thursday (October 18)

• 2:00 German WPI. Estimate 0.4%. Actual 0.4%
• Day 2 – EU Economic Summit
• 8:30 US Philly Fed Manufacturing Index. Estimate 19.7
• 8:30 US Unemployment Claims. Estimate 211K
• 10:00 US CB Leading Index. Estimate 0.5%
• 10:30 US Natural Gas Storage. Estimate 85B
• 12:15 US FOMC Member Randal Quarles Speaks

Friday (October 19)

• 4:00 Eurozone Current Account. Estimate 21.4B
• 10:00 US Existing Home Sales. Estimate 5.29M

*All release times are DST

*Key events are in bold

EUR/USD for Thursday, October 18, 2018

EUR/USD for October 18 at 4:30 DST

Open: 1.1501 High: 1.1516 Low: 1.1482 Close: 1.1523

EUR/USD Technical

EUR/USD ticked lower in the Asian session. In European trade, the pair posted small gains but has retracted

• 1.1434 is providing support
• 1.1553 is a weak resistance line

Further levels in both directions:

• Below: 1.1434, 1.1300 and 1.1190
• Above: 1.1553, 1.1611, 1.1735 and 1.1840
• Current range: 1.1434 to 1.1553

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.