EUR/USD – Euro Unchanged as German Final CPI Matches Forecast

The euro is unchanged in Friday trading. Currently, EUR/USD is trading at 1.1829, down 0.01% on the day. On the release front, German Final CPI came in at 0.1%, matching the forecast. Traders should be prepared for some movement from the pair in the North American session, as the US releases CPI and retail sales reports. The US will also release UoM Consumer Sentiment.

The Federal Reserve minutes from the September meeting appeared to confirm that a December rate increase is on the way. The minutes showed that many policymakers felt that a December hike “was likely to be warranted”. However, some policymakers remain concerned about low inflation levels and said that inflation would be a consideration in their decision on a rate hike. The odds of a December hike have increased dramatically in the past few weeks, mostly in response to Fed Chair Yellen and other FOMC members expressing optimism that inflation will move upwards. On Wednesday, Kansas City Fed President Esther George went event further, saying that low inflation did not pose a problem, as the US economy was strong and the labor market was at full capacity. Investors will be carefully monitoring Friday’s CPI reports as well as the Fed reaction. Currently, fed futures have priced in a December hike at 87 percent.

Did he or didn’t he? That is the question that Spanish Prime Minister Mariano Rajoy has demanded of Catalan President Carles Puigdemont, who last week declared Catalonia’s independence, but then suspended the move. On Wednesday, Rajoy gave Puigdemont eight days to reply and has threatened to suspend the Catalan parliament if indeed the regional government declared independence. The Catalan leader says he wants to negotiate with Madrid, but Rajoy has refused, saying session is illegal. The Spanish government has the backing of France, Germany, and other European Union members, and Catalonia itself appears evenly divided on independence. With both sides entrenched in their positions, the crisis is set to continue into next week. The crisis could take a toll on the Spanish economy, as several banks and large corporations have said they will move their legal headquarters out of Catalonia. The EU has refused to mediate, and is treating the issue as a domestic Spanish matter.

Spain gives Catalan Leader Eight Days to Drop Independence

ECB President Mario Draghi said on Thursday that he plans to maintain ultra-low rates “well past” the end of its bond-buying program in December. The ECB has been under pressure to tighten monetary policy, primarily from Germany, where the central bank has called for tighter policy, given the stronger eurozone economy. The ECB is expected to taper its monthly bond purchases of 60 billion euros at its policy meeting on October 26, but Draghi has sent out a clear message that rate hikes will have to wait until 2018. With inflation levels will below the ECB target of around 2 percent, Draghi has been reluctant to raise interest rates until inflation shows clear signs of moving upwards.

EUR/USD Fundamentals

Friday (October 13)

• 2:00 German Final CPI. Estimate 0.1%. Actual 0.1%
• 8:30 US CPI. Estimate 0.6%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.9%
• 8:30 US Retail Sales. Estimate 1.7%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1
• 10:00 US Business Inventories. Estimate 0.7%
• 10:00 US Preliminary UoM Inflation Expectations
• Day 1 – IMF Meetings
• 10:25 US FOMC Member Charles Evans Speaks
• 10:25 US FOMC Member Robert Kaplan Speaks
• Tentative – US Federal Budget Balance. Estimate -1.0B

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, October 13, 2017

EUR/USD Friday, October 13 at 4:25 EDT

Open: 1.1830 High: 1.1851 Low: 1.1815 Close: 1.1829

EUR/USD Technical

EUR/USD edged higher in the Asian session but has given up these gains in European trade

• 1.1712 is providing support
• 1.1876 is the next resistance line

Further levels in both directions:

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

OANDA’s Open Positions Ratio

In the Friday session, short positions have a majority (63%). This is indicative of EUR/USD breaking out and moving to lower 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.