EUR/USD: Eurozone CPI Declines, Euro Close to 8-week Highs

The euro has shown small gains on Thursday continuing the upward movement that has characterized EUR/USD this week. In the European session, the pair is trading at 1.1340. On the release front, Eurozone CPI came in at -0.1%, matching the forecast. German numbers were soft, as Retail Sales and Unemployment Change both fell short of expectations. In the US, today’s highlight is Unemployment Claims. This will be followed by Nonfarm Payrolls, which will be released on Friday.

The lack of inflation in the Eurozone has been a major headache for Mario Draghi & Co., and the ECB recently reduced interest rates and expanded its QE program in order to kick-start the economy and create some inflation. Eurozone CPI posted a second straight decline, coming in at -0.1%. Eurozone Core CPI posted a gain of 1.0%, within expectations. These readings came on the heels of a positive German CPI release on Wednesday, which showed a gain of 0.8% in March, the index’s best showing since February 2015. However, other German readings disappointed on Thursday. Retail Sales, the primary gauge of consumer spending, fell 0.4%, compared to an estimate of +0.3%. Unemployment Change failed to record a decline for the first time in five months, coming in at zero.

EUR/USD jumped almost 100 points on Tuesday, following ultra-dovish remarks from Janet Yellen, the chair of the Federal Reserve. Several Fed officials had called for a raise in interest rates as early as April, but the Fed chair poured cold water on any rate hike enthusiasm, as she gave notice that the Fed would maintain its cautious approach towards monetary tightening, given the risks to the US economy from turbulent global conditions and weakness in China. Yellen downplayed higher inflation levels, which in January reached 1.7 percent, the highest in almost two years. This reading is not far from the Fed’s target of 2.0 percent and some Fed members have gone on record saying that the Fed should raise rates before inflation pushes above the 2.0 percent threshold. Will Yellen’s cautious assessment be reinforced or challenged by Fed members? New York Fed president William Dudley will address a meeting in Lexington, Virginia on Thursday, and the markets will be looking for Dudley’s take on Yellen’s comments.

EUR/USD Fundamentals

Thursday (March 31)

• 6:00 German Retail Sales. Estimate 0.3%. Actual -0.4%
• 6:45 French Consumer Spending. Estimate 0.1%. Actual 0.6%
• 6:45 French Preliminary CPI. Estimate 0.5%. Actual 0.7%.
• 7:00 Spanish Flash CPI. Estimate -0.6%. Actual -0.8%
• 7:55 German Unemployment Change. Estimate -6K. Actual 0K
• 9:00 Eurozone CPI Flash Estimate. Estimate -0.1%. Actual -0.1% 
• 9:00 Eurozone Core CPI Flash Estimate. Estimate 0.9%. Actual 1.0%
• 9:00 Italian Preliminary CPI. Estimate 0.1%. Actual 0.2%
• 12:30 US Unemployment Claims. Estimate 266K
• 13:45 US Chicago PMI. Estimate 50.5
• 14:30 US Natural Gas Storage. Estimate -20B
• 21:00 US FOMC Member William Dudley Speaks

Upcoming Key Events

Friday (April 1)

• 9:00 Eurozone Unemployment Rate. Estimate 10.3%
• 12:30 US Average Hourly Earnings. Estimate 0.2%.
• 12:30 US Nonfarm Employment Change. Estimate 206K
• 12:30 US Unemployment Rate. Estimate 4.9% 

*Key events are in bold

*All release times are GMT

EUR/USD for Thursday, March 31, 2016

EUR/USD March 31 at 9:00 GMT

Open: 1.1322 Low: 1.1310 High: 1.1361 Close: 1.1355

EUR/USD Technical

• EUR/USD lost ground in the Asian session but has recovered in European trade and continues to post gains
• 1.1278 has some breathing room in support as the pair as posted slight gains
• 1.1378 is under strong pressure in resistance. Will this line break during the day?

Further levels in both directions:

• Below: 1.1278, 1.1172, 1.1087 and 1.0941
• Above: 1.1387, 1.1495 and 1.1609
• Current range: 1.1278 to 1.1378

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, consistent with the lack of significant movement from EUR/USD. Short positions have a strong majority (63%), which is indicative of strong trader bias towards EUR/USD reversing directions and dropping to lower levels.

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.