EUR/USD – Euro Ticks Higher, Markets Eye US Durable Goods, Jobless Reports

EUR/USD has posted small gains on Thursday, continuing the trend seen in the Wednesday session. The pair is trading at 1.1180. On the release front, there is just one Eurozone release on the schedule, Italian Retail Sales. The indicator declined 0.6%, missing expectations. In the US, it’s a busy day with three key events – Core Durable Goods Orders, Unemployment Claims and Pending Home Sales. If there are some unexpected readings, we could see some volatility from EUR/USD during the North American session. On Friday, the US releases Preliminary GDP and UoM Consumer Sentiment.

As the largest economy in the Eurozone, German numbers are closely watched, as they often serve as a bellwether for macro trends in the Eurozone. It’s been a mixed bag for German data this week. German Ifo Business Climate climbed to 107.7 points, above the estimate of 106.9. This was the indicator’s best showing in five months. However, German and Eurozone ZEW Economic Sentiment reports both softened in May and missed expectations, pushing the euro lower. Earlier in the week, German Final GDP recorded a respectable gain of 0.7% in the first quarter. This figure was unchanged from German Preliminary GDP, which also posted a 0.7% gain. With the ECB holding a policy meeting on June 2, German releases will play a key role in the ECB’s decision-making process. Stronger German data would point to an improving Eurozone economy and reduce pressure on the ECB to take monetary action such as cutting interest rates into negative territory.

Just last week, there was no talk of the Fed raising rates, but that has quickly changed after last week’s Fed minutes. The report was more hawkish than expected, and this resulted in strong volatility in the currency markets. It has also renewed market speculation about a June rate hike. Odds of a rate hike in June increased to 40% on Wednesday, compared to just 4% one week ago. Still, the Fed will be hard-pressed to raise rates if key indicators don’t show improvement, particularly inflation numbers. On Monday, FOMC member John Williams reiterated that he expected the Fed to raise rates two or three times in 2016. However, there appears to be a gap between the hawkish message some FOMC members are sending out and market sentiment, as many analysts are projecting only one rate hike this year. The guessing game as to what the Fed has in mind is likely to continue into June, but it’s safe to say that another rate move will be data-dependent, so stronger US numbers will increase the likelihood of a quarter-point hike at the June policy meeting. The Fed will be closely monitoring key events this week, notably GDP and UoM Consumer Sentiment.

EUR/USD Fundamentals

Thursday (May 26)

• Day 1 – G7 Meetings
• 8:00 Italian Retail Sales. Estimate 0.2%. Actual -0.6%
• 10:10 US FOMC Member James Bullard Speaks
• 12:30 US Core Durable Goods Orders. Estimate 0.3%
• 12:30 US Unemployment Claims. Estimate 275K
• 12:30 US Durable Goods Orders. Estimate 0.3%
• 14:00 US Pending Home Sales. Estimate 0.6%
• 14:30 US Natural Gas Storage. Estimate 67B
• 16:00 US FOMC Jerome Powell Speaks

Upcoming Key Events

Friday (May 27)

• 12:30 US Preliminary GDP. Estimate 0.8%
• 14:00 US Revised UoM Consumer Sentiment. Estimate 95.7

*All release times are GMT

EUR/USD for Thursday, May 26, 2016

EUR/USD May 26 at 9:05 GMT

Open: 1.1155 Low: 1.1190 High: 1.1154 Close: 1.1179

EUR/USD Technical

• EUR/USD has posted small gains in the Asian session and  has leveled off in European trade
• 1.1172 remains fluid and has switched to a support role. It is a weak line
• There is strong resistance at 1.1278

Further levels in both directions:

• Below: 1.1172, 1.1054, 1.0909 and 1.0821
• Above: 1.1278, 1.1378 and 1.1495
• Current range: 1.1172 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight movement towards short positions on Thursday. Currently, there is an even split between short and long positions, indicative of a lack of trader bias as to what direction EUR/USD will take next.

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.