EUR/USD – Euro Steady at 1.10, ECB Meeting Looms

EUR/USD is unchanged on Wednesday, following losses on the Tuesday session. The pair is currently trading at the 1.10 line. On the release front, there are no major releases on the schedule. German PPI posted a gain of 0.4%, beating the estimate. Eurozone Current Account dipped to EUR 30.8 billion, but this was above expectations. In the US, today’s sole event is Crude Oil Inventories, with the estimate standing at -1.3 million. On Thursday, the ECB meets for a policy meeting and will set the benchmark rate. Over in the US, the key release will be Unemployment Claims.

German ZEW Economic Sentiment, a highly regarded report, shocked the markets by posting a sharp decline in July, the first since October 2014. The reading of -6.8 points was nowhere near the forecast of +8.2 points, and recorded a sharp downturn after a gain of 19.2 points in June. Eurozone ZEW Economic Sentiment followed suit with a reading of -14.7 points, compared to an estimate of +12.3 points. In June, the index boasted a strong gain of 20.2 points. These dismal readings point to deep pessimism on the part of institutional investors and analysts, as the shock Brexit vote has raised serious concerns that Germany and the Eurozone could suffer a downturn in economic growth due to Britain exiting from the European Union.

Eurozone inflation numbers remain soft, much to the concern of the ECB. The ECB is under pressure to adopt further monetary easing, but the markets are not expecting a rate cut from the current rate of 0.00%. Still, a dovish rate statement or any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the second largest economy in Europe, will be soon be waving goodbye to the EU. This move (and the negotiations preceding it) are bound to have profound economic ramifications on both Britain and the EU, and could result in significant volatility in the currency markets.

EUR/USD Fundamentals

Wednesday (July 20)

• 6:00 German PPI. Estimate 0.2%. Actual 0.4%
• 8:00 Eurozone Current Account. Estimate 24.9B. Actual 30.8B
• 14:00 Eurozone Consumer Confidence. Estimate -8 points
• 14:30 US Crude Oil Inventories. Estimate -1.3M

Upcoming Key Events

Thursday (July 21)

• 11:45 Eurozone Minimum Bid Rate. Estimate 0.00%
• 12:30 ECB Press Conference
• 12:30 US Philly Fed Manufacturing Index. Estimate 5.1
• 12:30 US Unemployment Claims. Estimate 271K
• 14:00 US Existing Home Sales. Estimate 5.48M

* Key releases are in bold

*All release times are GMT

EUR/USD for Wednesday, July 20, 2016

EUR/USD July 20 at 9:50 GMT

Open: 1.1013 High: 1.1021 Low: 1.0981 Close: 1.1003

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted small losses in European trade
• 1.1054 is a weak resistance line
• 1.0925 is providing support

Further levels in both directions:

• Below: 1.0925, 1.0821 and 1.0708
• Above: 1.1054, 1.1150, 1.1278 and 1.1376
• Current range: 1.0925 to 1.1054

OANDA’s Open Positions Ratio

EUR/USD ratio has shown movement towards long positions Wednesday. Short positions have a majority (53%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.

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.