EUR/USD – Euro in Holding Pattern Ahead of German CPI, US GDP

EUR/USD is subdued on Thursday, as the pair remains slightly above the 1.12 line. On the release front, Germany releases Preliminary CPI, a key inflation indicator. In the US, today’s highlight is Final GDP, with the estimate standing at 1.3%. As well, the US will release unemployment claims and pending home sales. On Friday, the Eurozone will publish Flash Final CPI and the US releases UoM Consumer Sentiment.

There was positive news out of the Eurozone on Thursday. Economic sentiment index climbed to 104.9 in September, up from 103.5 in August. The markets had expected the indicator to remain unchanged. Economic sentiment is an early signal of trends in growth, so the solid release will be welcome news to the markets, which remain concerned about the impact of the Brexit vote on Europe. Services sentiment improved to 10.0, edging above the previous release of 9.9. Consumer confidence remains weak, but there was some improvement in September, as the indicator rose from -8.5 to -8.2.

US consumer confidence numbers continue to impress the markets. The CB Consumer Confidence jumped to 104.1 points in September, much higher than the forecast of 98.6 points. This excellent release improved upon a strong August report of 101.1 points. Stronger consumer confidence often translates into increased spending by consumers, which is vital for economic growth. If upcoming consumer spending numbers also move higher, the likelihood of a December hike will likely increase. Currently, the markets have priced in a quarter-point hike in December at 48 percent.

With the Federal Reserve staying on the sidelines in September and the November meeting just before the US election, the markets have circled December as the next date for a possible rate hike. Last week’s policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 48 percent, but plenty can happen before the December policy meeting. The Fed has been sending out mixed messages about a rate hike, and this was underscored in the September decision, in which three FOMC members dissented and voted for an immediate hike. This lack of clarity has been disconcerting to the markets, which are always allergic to uncertainty. The markets haven’t forgotten that last December, the Fed projected a series of hikes in 2016, and has yet to deliver even one hike this year. As we approach December, the Fed will need to send out a more uniform message in order to restore its credibility with the markets.

EUR/USD Fundamentals

Thursday (September 29)

• 00:00 US FOMC Member Esther George Speaks
• All Day – German Preliminary CPI. Estimate 0.0%
• 7:00 Eurozone Spanish Flash CPI. Estimate 0.1%. Actual 0.3%
• 7:55 German Unemployment Change. Estimate -5K. Actual +1K
• Tentative – Italian 10-year Bond Auction
• 12:30 US Final GDP. Estimate 1.3%
• 12:30 US Unemployment Claims. Estimate 260K
• 12:30 US Final GDP Price Index. Estimate 2.3%
• 12:30 US Goods Trade Balance. Estimate -62.6B
• 14:00 US FOMC Member Jerome Powell Speaks
• 14:00 US Pending Home Sales. Estimate -0.1%
• 14:30 US Natural Gas Storage. Estimate 57B
• 14:00 US Federal Chair Janet Yellen Speaks

Friday (September 30)

• 9:00 Eurozone Flash CPI. Estimate 0.4%
• 14:00 US Revised UoM Consumer Sentiment. Estimate 90.1

*All release times are EDT

* Key events are in bold

EUR/USD for Thursday, September 29, 2016

EUR/USD September 29 at 9:00 GMT

Open: 1.1223 High: 1.1236 Low: 1.1215 Close: 1.1220

EUR/USD Technical

• EUR/USD has posted small gains in the Asian and European sessions
• There is resistance at 1.1278
• 1.1150 is providing strong support

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 and 1.0821
• Above: 1.1278, 1.1376 and 1.1467
• Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (57%), indicative of trader bias towards EUR/USD breaking out and moving lower.

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.