EUR/USD – Euro Gains Ground Despite Dovish Mario

The euro has resumed its rally in the Friday session. Currently, EUR/USD is trading at 1.2463, up 0.51% on the day. On the release front, there are no major events in the eurozone. It’s a busy day in the US, highlighted by Advance GDP, which is expected to post a strong gain of 3.0%. As well, Core Durable Goods is forecast to rebound to 0.5%, but Durable Goods is expected to slow to 0.9%.

The ECB maintained interest rates at a flat 0.00% and ECB President Mario Draghi was dovish in his follow-up remarks, which kept the euro in check on Thursday. Draghi said that interest rates would not rise until well after the ECB’s asset-purchase program (QE) was over. The QE program will not end until September at the earliest, so Draghi essentially ruled out any rate hikes before early 2019. Draghi added that the ECB was prepared to increase QE in “size or duration”, a reminder to the markets that it is premature to expect normalization anytime soon. A new headache for Draghi is the streaking euro, which has hit 3-year highs against the US dollar. Investors are worried that a stronger euro could hurt exports and company earnings. EUR/USD has jumped 3.6% in January, as the dollar continues to struggle.

There will be a changing of the guard next month at the Federal Reserve, as Jerome Powell is set to replace Janet Yellen as chair of the powerful central bank. On Tuesday the Senate confirmed Jerome Powell as the next head of the Fed. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Yellen’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2 percent, despite a strong economy and a red-hot labor market. The markets will be watching to see how the Fed, under Powell’s watch, responds to recent tax reform legislation, which is sure to have a significant impact on the US economy.

U.S Dollar Shackled to Trumps Trade and Twitter Rants

EUR/USD Fundamentals

Friday (January 26)

• 4:00 Eurozone M3 Money Supply. Estimate 4.9%. Actual 4.6%
• 4:00 Eurozone Private Loans.  Estimate 2.9%. Actual 2.8%
• 8:30 US Advance GDP. Estimate 3.0%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Advance GDP Price Index. Estimate 2.3%
• 8:30 US Durable Goods Orders. Estimate 0.9%

*All release times are GMT

*Key events are in bold

EUR/USD for January 26, 2018

EUR/USD for January 26 at 6:45 EDT

Open: 1.2398 High: 1.2493 Low: 1.2370 Close: 1.2460

EUR/USD Technical

In the Asian session, EUR/USD lost ground but then recovered and moved higher. The pair continues to  post gains in European trade

• 1.2357 has strengthened in support following gains by EUR/USD on Friday
• 1.2481 was tested earlier in resistance and remains under pressure

Further levels in both directions:

• Below: 1.2357, 1.2286, 1.2200 and 1.1961
• Above: 1.2481, 1.2569 and 1.2677
• Current range: 1.2357 to 1.2481

OANDA’s Open Positions Ratio

EUR/USD ratio has shown little movement this week. Currently, short positions have a majority (63%), indicative of EUR/USD reversing directions and heading to lower 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.