EUR/USD – Euro Drifting Continues, German Consumer Economic Sentiment Beats Expectations

EUR/USD continues to have an uneventful week, as the pair trades slightly below the 1.09 line in the European session. On the release front, it’s a busy day in the Eurozone. German ZEW Economic Sentiment beat expectations, while Eurozone CPI posted a weak gain of 0.2%, matching the forecast. There are no major US releases on Tuesday. We’ll get a look at key US numbers on Wednesday, with the release of CPI and Building Permits.

The euro has managed to hold its own against the US dollar, bolstered by some positive Eurozone readings. Recent releases have pointed to stronger growth in the bloc, especially in Germany, the largest economy in Europe. German ZEW Economic Sentiment softened in December, but still beat the estimate. However, Eurozone ZEW Economic Sentiment missed expectations. European inflation levels remain weak, as underscored by Eurozone CPI, which remained unchanged at 0.2%. Meanwhile, the minutes from the December ECB policy meeting indicated that some policymakers want to see further cuts to deposit rates as well as an increase in the current QE program of EUR 60 billion/mth. The markets will be keeping a close eye on the upcoming ECB policy meeting on Thursday, and if Mario Draghi & Co. implement further monetary easing, we can expect the euro to lose ground.

The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. A rate hike from the Fed at next week’s policy meeting is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent, however, on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. The Fed will be keeping a close eye on inflation and wage growth data before opting to press the rate trigger for the first time in 2016.

EUR/USD Fundamentals

Tuesday (Jan. 19)

• 2:00 German Final CPI. Estimate -0.1%. Actual -0.1%
• 4:00 Eurozone Current Account. Estimate 19.3B. Actual 26.4B
• 5:00 German ZEW Economic Sentiment. Estimate 8.2 points. Actual 10.2 points
• 5:00 Eurozone ZEW Economic Sentiment. Actual 27.9 points. Actual 22.7 points
• 5:00 Eurozone Final CPI. Estimate 0.2%. Actual 0.2%
• 5:00 Eurozone Final Core CPI. Estimate 0.9%. Actual 0.9%
• 10:00 US NAHB Housing Market Index. Estimate 61 points
• 16:00 US TIC Long-Term Purchases

Upcoming Key Events

Wednesday (Jan. 20)

• 8:30 US Building Permits. Estimate 1.20M
• 8:30 US CPI. Estimate 0.0%
• 8:30 US Core CPI. Estimate 0.2%

*Key events are in bold

*All release times are EST

EUR/USD for Tuesday, January 19, 2016

EUR/USD January 19 at 5:30 EST

Open: 1.0892 Low: 1.0859 High: 1.0905 Close: 1.0885

EUR/USD Technical

• EUR/USD has posted marginal losses in the Asian and European sessions
• 1.0941 remains a weak resistance line
• 1.0847 is providing support
• Current range: 1.0847 to 1.0941

Further levels in both directions:

• Below: 1.0847, 1.0732, 1.0659 and 1.0537
• Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, reflective of the lack of movement from the pair. Short positions command a strong majority (55%), indicative of trader bias towards the euro moving downwards.

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.