EUR/USD – Little Movement as Eurozone CPI Contracts

EUR/USD is almost unchanged on Friday, as the pair is trading at 1.1380 early in the European session. The pair lost about 100 points on Thursday, erasing the gains made a day earlier.  In today’s economic releases, there were further signs of deflation in the Eurozone, as Eurozone Final CPI came in at -0.1%, matching the forecast. This marked the first decline from the indicator since March. Traders should expect some volatility later in the day as the US releases two key events, UoM Consumer Sentiment and JOLTS Job Openings.

Thursday was a day of mixed messages from US releases. Low inflation levels in the US continue to hamper the domestic economy, as underscored by September’s consumer inflation reports. CPI posted a decline of 0.2%, its lowest level since January. Still, this figure matched the forecast. Core CPI was a bit stronger, with a gain of 0.2%. On the employment front, unemployment claims were very strong, dropping to 255 thousand, compared to an estimate of 269 thousand. Will JOLTS Job Openings follow suit with a strong reading on Friday?

Meanwhile, US manufacturing numbers in October were dismal. The Empire State Manufacturing Index posted its third straight decline, coming in at -11.4 points, missing the forecast of -7.3 points. The Philly Fed Manufacturing Index, a key release, came in at -4.5 points, shy of the estimate of -1.8 points. These figures point to contraction in the US manufacturing sector, which continues to suffer from weak global demand.

What message is the Fed trying to send to the markets? Federal Reserve policymakers seem divided on the question of a rate hike in 2015. This was underscored this week by FOMC member Lael Brainard, who stated that the Fed should not raise rates before global economic conditions improve. Brainard noted that the Chinese slowdown has caused economic turmoil worldwide, and the US economy could lose steam due to weaker exports and weak global economic conditions. On the other end of the spectrum, another member of the FOMC, Dennis Lockhart, sounded more optimistic about a rate hike before the end of 2015. Lockhart did not rule out a rate hike in October, and added that the Fed would have more data to evaluate before its December policy meeting. With FOMC members sending out such conflicting messages, it is no wonder that the frustrated markets have been unable to get a handle on the timing of a rate hike, and this failure of the Fed to communicate a clear message to the Fed has hurt the US dollar, as we saw after the release of the Fed minutes last week.

EUR/USD Fundamentals

Friday (Oct. 16)

• 8:00 Italian Trade Balance. Estimate 4.23B. Actual 1.85B.
• 9:00 Eurozone Final CPI. Estimate -0.1%. Actual -0.1%.
• 9:00 Eurozone Final Core CPI. Estimate +0.9%.
• 9:00 Eurozone Trade Balance. Estimate 22.2B.
• 13:15 US Capacity Utilization Rate. Estimate 77.4%.
• 13:15 US Industrial Production. Estimate -0.2%.
• 14:00 US Preliminary UoM Consumer Sentiment. Estimate 88.8 points.
• 14:00 US JOLTS Job Openings. Estimate 5.77M.
• 14:00 US Preliminary UoM Inflation Expectations.
• 20:00 US TIC Long-Term Purchases. Estimate 24.3B.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Friday, October 16, 2015

EUR/USD October 16 at 9:15 GMT

EUR/USD 1.1359 H: 1.1395 L: 1.1353

EUR/USD Technical

• EUR/USD was steady in the Asian session and has posted very slight losses in European trading.
• 1.1296 is an immediate support line.
• 1.1392 remains active and has switched back to resistance. It is a weak line.
• Current range: 1.1296 to 1.1392

Further levels in both directions:

• Below: 1.1296, 1.1214, 1.1105 and 1.1017
• Above: 1.1392, 1.1470, 1.1658, 1.1712 and 1.1871

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged on Friday, as long positions retain a strong majority of the open positions (63%). This points to trader sentiment in favor of the dollar gaining ground against the euro.

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.