EUR/USD – Steady At 1.38 As Markets Await Fed Minutes

The euro is showing little movement on Wednesday, as the pair trades close to the 1.38 line in the European session. The euro has had an excellent week, boasting gains of about 100 points. Taking a look at today’s releases, German Trade Balance posted its lowest surplus in six-months. In the US, today’s major event is the minutes from the Federal Reserve’s last policy meeting. Traders should be prepared for some movement from EUR/USD following the Fed release.

All eyes are on the Federal Reserve, which will release the minutes of its most recent policy meeting on Wednesday. Last week, Fed chair Janet Yellen sounded dovish in her outlook on the US economy, saying that inflation and employment levels needed to improve and monetary stimulus would continue for some time. So it shouldn’t be a surprise if the minutes state that the US still has a long way to go on the road to recovery. If the minutes don’t paint an upbeat picture of the US economy, the dollar could lose some ground. Currently, the Fed is purchasing $55 billion in assets each month under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence, which would possibly force the Fed to delay further tapers. As the tapers are dollar-positive, any delay would be bearish for the greenback.

It was more of the same from the ECB last week, as the central bank stood pat and did not make any moves, despite serious worries about weak growth and low inflation. On Tuesday, ECB policymaker Yves Mersch said that ECB officials were working on a QE scheme in order to combat deflationary pressures, but added that there was no immediate need for such a program. Meanwhile, Bundesbank President Jens Weidmann said that monetary policy alone will not solve the Eurozone’s economic problems, saying that political leaders must undertake fiscal and other reforms.

Tensions between the US and Russia continue to worsen over the Ukraine. On Monday, pro-Russian demonstrators took over a government building in an industrial city in the east of the country and declared their independence. Russia has warned the Ukraine not to react with force, while the US has accused Russia of continuing to foment unrest in the Ukraine ahead of elections in May. With the country split down the middle between pro-Western and pro-Russian camps, we could see the turmoil continue.

EUR/USD for Wednesday, April 9, 2014

EUR/USD April 9 at 10:40 GMT

EUR/USD 1.3800 H: 1.3809 L: 1.3780

EUR/USD Technical

• EUR/USD is showing limited movement on Wednesday.
• 1.3786 has switched to a support role. 1.3649 is the next support line.
• On the upside, 1.3893 is a strong resistance line. It is protecting the 1.39 level.
• Current range: 1.3786 to 1.3893

Further levels in both directions:

• Below: 1.3786, 1.3649, 1.3585, 1.3410 and 1.3335
• Above: 1.3893, 1.4000, 1.4149 and 1.4307

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in long positions on Wednesday, reversing the direction seen a day earlier. This is not consistent with the pair’s current movement, as the euro has edged upwards. Short positions retain a strong majority, indicative of trader bias towards the dollar reversing its current direction and moving higher.

EUR/USD is showing little movement on Wednesday, as the pair trades close to the 1.38 line.

EUR/USD Fundamentals

• 6:00 German Trade Balance. Estimate 18.0B. Actual 15.7B.
• 14:00 US Wholesale Inventories. Estimate 0.5%.
• 14:30 US Crude Oil Inventories. Estimate 1.0M.
• 17:01 US 10-year Bond Auction.
• 18:00 US FOMC Meeting Minutes.
• 23:00 US FOMC Member Daniel Tarullo Speaks.

*Key releases are highlighted in bold

*All release times are GMT

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