EUR/USD – Euro Listless Ahead of US GDP

The euro has been drifting this week, and continues to stay close to the 1.12 level. Currently, EUR/USD is trading at 1.1220. For a second straight day, there are no releases in the eurozone. It’s a busy day in the US, highlighted by Second Estimate GDP, which is expected to post a gain of 0.9%, better than the initial GDP report of 0.7%. This will be followed by Core Durable Goods Orders and UoM Consumer Sentiment. Leaders of the G7 are gathered in Sicily for a two-day meeting, with the response to global terror high on the agenda, especially in light of the Manchester bombing earlier this week.

German indicators continue to point upwards, and German business confidence hit a record high in May. The Ifo Business Climate Index improved to 114.6, its highest level since Germany was reunified in 1991. The election of Emmanuel Macron as the French president has boosted business confidence, as the German corporate sector is optimistic that Berlin and Paris can work together to improve the eurozone economy. France is Germany’s second largest trading partner and Macron underscored the importance he attaches to Franco-German relations when he visited German chancellor Angela Merkel within days of winning the presidency. The Brexit vote and Donald Trump’s “America first” agenda present serious challenges to the EU, and Merkel and Macron will have no problem seeing eye-to-eye in their desire to deepen European integration.

Federal Reserve policymakers find themselves in a quandary, as the US economy has been sending conflicting signals with regard to inflation and employment. The labor market remains red hot, as the unemployment rate fell to 4.4 percent in April, its lowest level since 2007. Problem is, inflation hasn’t kept up, and remains below the Fed target of 2 percent. The Fed minutes stated that the central bank plans to raise rates “soon”, and the odds of a June hike remain at about 78%, unchanged by the minutes. At the same time, the Fed has provided itself some wiggle room, and could opt to delay a hike until the second quarter if inflation or consumer indicators take an unexpected nosedive. As for additional hikes in 2017, the markets remain skeptical. The odds for a September rate stand at just 37%, with the markets unclear on whether the Fed will make further moves this year if inflation remains below the Fed target. Even if soft first quarter data was a blip, the markets (and possibly Fed policymakers) are concerned that President Trump, who is facing congressional investigations over his connections with the Russian government, may not be able to pass his agenda of cutting taxes and reigning in government spending. Gone are the heady days at the end of 2016, when a red-hot US economy had analysts predicting four rate hikes in 2017.

The US dollar struggles post Fed minutes

Where are the hawks?

EUR/USD Fundamentals

Friday (May 26)

• Day 1 – G7 Meetings
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Preliminary GDP. Estimate 0.9%
• 9:00 US Durable Goods Orders. Estimate -1.4%
• 9:00 US Preliminary GDP Price Index. Estimate 2.3%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 97.6
• 10:00 US Revised UoM Inflation Expectations

*All release times are EDT

*Key events are in bold

EUR/USD for Friday, May 26, 2017

EUR/USD Friday, May 26 at 5:45 EDT

Open: 1.1210 High: 1.1235 Low: 1.1185 Close: 1.1215

EUR/USD Technical

EUR/USD ticked lower in the Asian session but has reversed directions and edged higher in European trade

• 1.1122 is providing support
• 1.1242 is the next resistance line. It remains a weak line

Further levels in both directions:

• Below: 1.1122, 1.0985 and 1.0873
• Above: 1.1242, 1.1366, 1.1465 and 1.1534
• Current range: 1.1122 to 1.1242

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Friday session. Currently, short positions have a majority (68%), indicative of EUR/USD reversing directions 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.