EUR/USD – Euro Steady, German Economic Sentiment Surges

EUR/USD is trading quietly on Tuesday, as the pair just at the 1.10 line in the European session. In economic news, German and Eurozone ZEW Economic Sentiment reports jumped in December. In the US, we’ll get a look at consumer inflation numbers. In what could be the most important economic event of the year, the Federal Reserve is widely expected to raise interest rates on Wednesday.

There was a dose of good news out of the Eurozone on Tuesday, as ZEW economic sentiment reports from Germany and the Eurozone both improved sharply from the November report. The German release came in at 16. 1 points, good enough for a 4-month high. This beat the forecast of 15.2 points. The Eurozone event rose to 33.9 points, up from 28.3 points a month earlier. Still, this fell short of the estimate of 34.4 points. The euro has rallied in impressive fashion in December, surging close to 500 points. The currency dropped perilously close to the 1.05 line just two weeks ago, but has since rebounded sharply, as it trades at the 1.10 line. The catalyst in the euro’s surge was the ECB policy meeting on December 3, as Mario Draghi and Co. shocked the markets by not introducing any substantial monetary moves, despite the Eurozone economy languishing with little growth or inflation.

Global markets remain abuzz over a widely anticipated rate hike by the Federal Reserve on Wednesday. The Fed will conclude a two-day policy meeting and all indications are that the Fed will raise rates by 0.25%, to be followed by further rate hikes in 2016. The Fed last raised rates back in June 2006, and Fed chief Janet Yellen and other policymakers have sent broad signals to the markets that the US central bank if finally ready to act. The US economy is close to full employment, and Yellen recently stated that she was not concerned about persistently low inflation. How the currency markets will react to a hike is of course, the million dollar question. Given that the markets have had ample time to price in this event, volatility from EUR/USD could be muted. At the same time, even a small rate increase represents a huge shift in the Fed’s monetary policy, one which is positive for the US dollar.

Tuesday (Dec. 15)

• 10:00 German ZEW Economic Sentiment. Estimate 15.2 points. Actual 16.1 points
• 10:00 Eurozone ZEW Economic Sentiment. Estimate 34.4 points. Actual 33.9 points
• 10:00 Eurozone Employment Change. Estimate 0.2%. Actual 0.3%
• 13:30 US CPI. Estimate 0.0%
• 13:30 US Core CPI. Estimate 0.2%
• 13:30 Empire State Manufacturing Index. Estimate -5.7 points
• 15:00 US NAHB Housing Market Index. Estimate 63 points
• 21:00 US TIC Long-Term Purchases. Estimate 32.4B

Upcoming Key Events

Wednesday (Dec. 16)

• 8:00 French Flash Manufacturing PMI. Estimate 50.6 points 
• 8:30 German Flash Manufacturing PMI. Estimate 52.7 points
• 13:30 US Building Permits. Estimate 1.16M
• 19:00 US FOMC Economic Projections
• 19:00 US FOMC Statement
• 19:00 US Federal Funds Rate. Estimate <0.50%
• 19:30 US FOMC Press Conference

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Tuesday, December 15, 2015

EUR/USD December 15 at 11:15 GMT

EUR/USD 1.1006 H: 1.1060 L: 1.0989

EUR/USD Technical

• EUR/USD posted slight gains in the Asian session but has retracted in European trade
• 1.0941 is the next support line.
• 1.1087 remains an immediate resistance line
• Current range: 1.0941 to 1.1087

Further levels in both directions:

• Below: 1.0941, 1.0847, 1.0732 and 1.0659
• Above: 1.1087, 1.1172 and 1.1305

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Tuesday, reflecting the lack of movement from the pair. Short positions continue to have a majority (56%), indicative of trader bias towards the euro losing ground.

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.