EUR/USD – Euro Steady Ahead of Expected Fed Hike

The euro is showing limited movement in the Wednesday session. Currently, EUR/USD is trading at 1.0630. On the release front, the markets await the Federal Reserve’s monetary policy statement, with a rate hike expected. As well, the US will release retail sales and PPI. There are no major releases out of the Eurozone. Thursday will also be busy, as the US releases CPI, the Philly Fed Manufacturing Index and unemployment claims.

The Eurozone economy has shown improvement in the third quarter, as inflation and growth numbers have moved higher. Confidence levels among investors and analysts remain strong, as underscored by ZEW Economic Sentiment reports in December. The German indicator remained at 13.8 points, although this was short of the forecast of 14.2. The Eurozone report jumped to 18.1, beating the estimate of 16.5. These figures point to optimism over growth aspects in the Eurozone and in Germany, the bloc’s number one economy. On Thursday, German and Eurozone Manufacturing PMIs are expected to point to expansion.

The Federal Reserve will be front and center on Wednesday, as the markets anxiously await the Fed’s rate statement. The markets have priced in a rate hike at 95 percent, most likely a quarter-point increase. This would mark the first hike by the Fed since last December, and anticipation of a hike has translated into strong gains for the greenback.  Even though the rate move has been expected (and priced in) for some time, the markets will be monitoring the statement closely – the currency markets could react based on whether the markets view the Fed’s move as a dovish hike or hawkish hike. What can we expect from the Fed after the hike? The Fed has indicated that it plans to raise rates gradually in 2017. However, this monetary outlook could change, given Trump’s declarations that he will increase government spending and cut taxes, which could lead to higher inflation levels. Once the new administration’s economic policies become clearer, the Fed may send signals to the markets as to its rate plans in early 2017.

EUR/USD Fundamentals

Wednesday (December 14)

• 7:45 French Final CPI. Estimate 0.0%. Actual 0.0%
• 10:00 Eurozone Industrial Production. Estimate 0.2%
• 13:30 US Core Retail Sales. Estimate 0.4%
• 13:30 US PPI. Estimate 0.1%
• 13:30 US Retail Sales. Estimate 0.3%
• 13:30 US Core PPI. Estimate 0.2%
• 14:15 US Capacity Utilization Rate. Estimate 75.1%
• 14:15 US Industrial Production. Estimate -0.2%
• 15:00 US Business Inventories. Estimate -0.1%
• 15:30 US Crude Oil Inventories. Estimate -1.4M
• 19:00 US FOMC Economic Projections
• 19:00 US FOMC Statement
• 19:00 US Federal Funds Rate. Estimate <0.75%
• 19:30 US FOMC Press Conference

Upcoming Key Events

Thursday (December 15)

• 13:30 US CPI. Estimate 0.2%
• 13:30 US Core CPI. Estimate 0.2%
• 13:30 US Philly Fed Manufacturing Index. Estimate 9.1
• 13:30 US Unemployment Claims. Estimate 258K

*All release times are GMT

* Key events are in bold

EUR/USD for Thursday, December 15, 2016

EUR/USD December 15 at 10:20 GMT

Open: 1.0628 High: 1.0664 Low: 1.0611 Close: 1.0635

EUR/USD Technical

• EUR/USD has been flat in the Asian and European sessions
• 1.0616 is under pressure as support
• 1.0708 is the next line of resistance

Further levels in both directions:

• Below: 1.0616, 1.0506, 1.0414 and 1.0287
• Above: 1.0708, 1.0821 and 1.0957
• Current range: 1.0616 to 1.0708

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Wednesday session. Currently, long positions have a majority (58%), indicative of trader bias towards EUR/USD breaking out and moving upwards.

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.