EUR/USD – Euro Under Pressure After Draghi Stimulus Comments

EUR/USD has posted slight losses, as the pair briefly dipped below the 1.07 level on Thursday. In the European session, the pair is trading  at 1.0740 in the European session. It’s a busy day on the economic front in both the Eurozone and the US. German CPI came in at a flat 0.0%, and French CPI posted a marginal gain of 0.1%. Speaking in Brussels, ECB head Mario Draghi hinted that the ECB could take further easing measures in December. In the US, today’s key event is Unemployment Claims. Traders should be prepared for volatility on Friday, as there are a host of key events. Germany will release Preliminary GDP, and the US will release Retail Sales, PPI and UoM Consumer Confidence.

ECB head Mario Draghi testified before an ECB monetary committee on Thursday, and his broad hint about further easing in December has put downward pressure on the euro. Draghi made note of weak inflation in the Eurozone and stated that the ECB would  “reexamine the degree of monetary policy accommodation,” Does this mean that the ECB will increase stimulus in December? Even if the central bank doesn’t make a move next month, we’re likely to see the current easing program extended beyond September 2016. With the Federal Reserve contemplating a rate hike in December, monetary divergence has sharpened and will continue to weigh on the euro, which is struggling at the lowest levels we’ve seen since April.

Looking for an encore after last week’s excellent Nonfarm Payrolls, the markets will be looking for more good news from US employment numbers. Strong job numbers not only point to a solid US economy, but will increase the likelihood of a rate increase in December, an event which would likely send the greenback to higher levels against its rivals. We’ll get a look at unemployment claims later on Thursday, with the key indicator expected to drop to 270 thousand. Although last week’s reading of 276 thousand was higher than expected, the four-week indicator, which is less volatile than the weekly measurement, remains at its lowest level since December 1973. A strong reading from unemployment claims could bolster the US dollar.

The Fed policy statement was unexpectedly hawkish in October, and this has understandably fueled market speculation about a rate hike in December. At the same time, the Fed has been split over a rate hike for quite some time, and many members will be hesitant to vote in favor of raising rates unless they are confident that the US economy can withstand an interest rate hike. Employment numbers out of the US have certainly improved, with recent indicators such as the unemployment rate pointing to close to full employment in the US economy. At the same time, other indicators have not fared as well, particularly manufacturing data and inflation levels. While a rate hike in December is back on the front burner, it is by no means a done deal, making for plenty of speculation on the part of market players in the next several weeks regarding a possible move by the Fed.

EUR/USD Fundamentals

Thursday (Nov. 12)

•  7:00 German Final CPI. Estimate 0.0%. Actual 0.0%
• 7:45 French CPI. Estimate 0.1%. Actual 0.1%
• 8:30 ECB President Mario Draghi Speaks
• 10:00 Eurozone Industrial Production. Estimate -0.1%
• 10:30 ECB President Mario Draghi Speaks
• 13:30 US Unemployment Claims. Estimate 270K
• 14:30 US Federal Reserve Chair Janet Yellen Speaks
• 15:00 US JOLTS Openings. Estimate 5.39M
• 15:15 US FOMC Member Charles Evans Speaks
• 16:00 US Crude Oil Inventories. Estimate 0.8M
• 15:15 US FOMC Member William Dudley Speaks
• 18:01 US 30-year Bond Auction
• 19:00 US Federal Budget Balance. Estimate -130.2B
• 23:00 US FOMC Member Stanley Fischer Speaks

Upcoming Key Events

Friday (Nov. 13)

• 7:00 German Preliminary GDP. Estimate 0.3%
• 13:30 US Core Retail Sales. Estimate 0.4%
• 13:30 US PPI. Estimate 0.2%
• 13:30 US Retail Sales. Estimate 0.3%
• 15:00 US Preliminary UoM Consumer Sentiment. Estimate 91.3 points

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Thursday, November 12, 2015

EUR/USD November 12 at 11:20 GMT

EUR/USD 1.0739 H: 1.0774 L: 1.0729

EUR/USD Technical

• EUR/USD posted slight gains in the Asian session but was unable to consolidate these gains. The pair has posted slight losses in the European session.
• 1.0847 is the next resistance line.
• On the downside, 1.0732 was tested earlier and remains under strong pressure.
• Current range: 1.0732 to 1.0847

Further levels in both directions:

• Below: 1.0732, 1.0659 and 1.05
• Above: 1.0847, 1.0941, 1.1017 and 1.1105

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, reflective of the lack of movement from the pair. The ratio is close to an even split between long and short positions (49:51). This indicates a lack of trader bias as to what direction the pair 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.