EUR/USD – Euro Quiet on Lack of Eurozone Data, Fed Statement Looms

The euro continues to have a quiet week. Currently, EUR/USD is trading at 1.1634, down 0.11% on the day. On the release front, there are no eurozone indicators. The US will release two key events – ADP Nonfarm Payrolls and ISM Manufacturing PMI. As well, the FOMC will release its monthly rate statement. On Thursday, the key event is US unemployment claims.

The euorozone released key inflation and GDP data on Tuesday, and the euro showed little reaction to the mixed results. Inflation forecasts for October missed their estimates. CPI Flash Estimate edged down to 1.4%, shy of the forecast of 1.5%. Core CPI Flash Estimate dipped to 0.9%, short of the estimate of 1.1%. There was better news from Preliminary Flash GDP, which remained unchanged at 0.6%, above the estimate of 0.5%. An improvement in economic conditions has slowly but surely pushed unemployment levels lower. In September, the unemployment rate dropped to 8.9%, down from 9.1% a month earlier. This marked the lowest level since March 2009.

After months of speculation, the ECB announced last week that it will begin tapering its asset purchase program, from EUR 60 billion/mth to EUR 30 billion/mth. The program, which was scheduled to end in December, has been extended to April 2018. However, ECB President Mario Draghi added a dovish twist to the move, stating that the program would remain open-ended. This provides the cautious ECB with the ability to keep the program in place beyond April without causing strong movement in the currency and stock markets. The euro has reacted sharply to ECB moves (or lack of a move) in the past, and Draghi would like to minimize the ECB’s involvement in market movement.

The Federal Reserve will be in the spotlight later on Wednesday, with the release of a rate statement. The Fed will almost certainly refrain from a rate hike, so analysts will be combing through the rate statement, looking for clues about future rate moves. The markets have priced in a December rate hike at a whopping 96 percent, and the markets are looking for clues with regard to rate policy in 2018. This will depend to a large degree on the new chair of the Fed, who will take over from Janet Yellen in February. The two front-runners, John Taylor and Jerome Powell, have very different stances on monetary policy, which has created some suspense ahead of President Trump’s nomination. Trump is expected to choose the new head before departing for Asia at the end of the week. Powell is expected to continue Yellen’s incremental approach to raising rates, while Taylor is a proponent of much higher rates, as underscored in his “Taylor Rule”, which calls for higher rates when inflation is high or the labor market is at full capacity.

EUR/USD Fundamentals

Wednesday (November 1)

• 8:15 ADP Nonfarm Employment Change. Estimate 202K
• 9:45 US Final Manufacturing PMI. Estimate 54.5
• 10:00 US ISM Manufacturing PMI. Estimate 59.5
• 10:00 US Construction Spending. Estimate -0.1%
• 10:00 US ISM Manufacturing Prices. Estimate 68.0
• 10:30 US Crude Oil Inventories. Estimate -1.5M
• All Day – Total Vehicle Sales. Estimate 17.5M
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.25%

Thursday (November 2)

• 4:55 German Final Manufacturing PMI. Estimate 60.5
• 4:55 German Unemployment Change. Estimate -10K
• 5:00 Eurozone Final Manufacturing PMI. Estimate 58.6
• 8:30 US Unemployment Claims. Estimate 235K

*All release times are GMT

*Key events are in bold

EUR/USD for Wednesday, November 1, 2017

EUR/USD for November 1 at 6:00 EDT

Open: 1.1646 High: 1.1657 Low: 1.1626 Close: 1.1634

EUR/USD Technical

EUR/USD recorded small losses in the Asian session but has recovered in European trade

• 1.1611 is providing support
• 1.1712 is the next resistance line

Further levels in both directions:

• Below: 1.1611, 1.1489 and 1.1366
• Above: 1.1712, 1.1876, 1.1996 and 1.2018
• Current range: 1.1611 to 1.1712

OANDA’s Open Positions Ratio

EUR/USD is showing little movement in the Wednesday session. Currently, short positions have a majority (63%), indicative of EUR/USD breaking out and 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.