EUR/USD – Lack of Fundamentals Leaves Euro Subdued

The euro has ticked higher in at the start of the week. In Monday’s European session, EUR/USD is trading at 1.1220. There are no major releases out of the eurozone or the US. On Tuesday, Germany releases ZEW Economic Sentiment and the US publishes PPI.

The markets had low expectations going ahead of the ECB meeting last week, so there was some surprise as the central bank did tweak its monetary stance. The ECB kept the benchmark rate pegged at 0.00%, and made no changes to its asset-purchase plan (QE) of EUR 60 billion/month. The cautious ECB did, however, remove its guidance on rate cuts, as the ECB rate statement said that it expected interest rates to remain at “present levels” for an extended period of time. This was slightly more hawkish than the April statement, which said that policymakers expected rates to remain at present or lower levels” for an extended period. As well, Mario Draghi characterized risks to the economy as “broadly balanced”, compared to previous warnings that risks were “tilted to the downside. The subtle nuance in wording appears to be a nod to improving economic conditions in the euro-area, and could be a sign that the ECB may look to wind up its stimulus program before it terminates in December, if the economy continues to improve. The ECB has revised upwards its growth forecast for 2017 and 2018, although it has lowered its inflation forecast, which may have weighed on the euro and prevented any gains following the ECB rate meeting.

There was little suspense in the first round of French parliamentary elections, as President Emmanuel Macron led with 28% of the vote. Macron is expected to win a huge majority in the second round of voting on Sunday, which will determine the makeup of the 577 seats in the National Assembly. Macron, whose party is just a year old, is expected to put forward pro-business legislation, which will not sit well with the powerful labor unions. Macron wants to streamline government and overhaul labor laws, in order to revive a weak economy. Any changes to France’s generous employment benefits is bound it be contentious, but a strong majority in parliament will make Macron’s job easier.

EUR/USD Fundamentals

Monday (June 12)

• 4:00 Italian Industrial Production. Estimate +0.2%. Actual -0.4%
• 13:01 US 10-y Bond Auction
• 14:00 US Federal Budget Balance. Estimate -87.3B

Tuesday (June 13)

• 5:00 German ZEW Economic Sentiment. Estimate 21.6
• 8:30 US PPI. Estimate 0.0%

*All release times are EDT

*Key events are in bold

EUR/USD for Monday, June 12, 2017

EUR/USD Monday, June 12 at 6:55 EDT

Open: 1.1196 High: 1.1228 Low: 1.1196 Close: 1.1215

EUR/USD Technical

EUR/USD has shown little movement in the Asian and European sessions

• 1.1122 is providing support
• 1.1242 is a weak resistance line

Further levels in both directions:

• Below: 1.1122, 1.0985 and 1.0873
• Above: 1.1242, 1.1366, 1.1465 and 1.1534
• Current range: 1.1122 to 1.1242

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Monday session. Currently, short positions have a majority (70%), indicative of EUR/USD reversing directions and gaining ground.

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