EUR/USD – Euro Range-Bound Ahead of Key US Reports

EUR/USD continues to tread quietly this week, as the pair trades at the 1.09 line in Friday’s European session. On the release front, Eurozone Trade Balance improved to EUR 22.7 billion, beating expectations. It’s a very busy day in the US, with four key releases, with reports covering inflation, retail sales and consumer confidence. So we could see some volatility from EUR/USD if there are any surprises from these key indicators.

The euro continues to hold its own against the US dollar, and received some help from a solid Eurozone Trade Balance report for November, posting a surplus of EUR 22.7 billion, its best showing since April 2015. Recent Eurozone indicators have pointed to stronger growth in the bloc, especially in Germany, the largest economy in Europe. Meanwhile, the minutes from the December ECB policy meeting indicated that some policymakers want to see further cuts to deposit rates as well as an increase in the current QE program of EUR 60 billion/mth. Such moves would likely weaken the euro, so the markets will be keeping a close eye on the upcoming ECB policy meeting on Jan 21.

When will the Fed strike next? The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. Many experts are forecasting another hike in March, contingent on a strong US economy. The Fed has hinted that it could raise rates up to four times in 2016, but experts like Chase Chief Economist Anthony Chan argue that is an unlikely scenario. A rate hike in late January is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent of course on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. This was underscored by the last Average Hourly Earnings report, which came in at a flat 0.0% in December. The Fed will be keeping a close eye on inflation and wage growth data before reaching a decision to raise rates for a second time.

EUR/USD Fundamentals

Friday (Jan. 15)

  • 2:45 French Government Budget Balance. Actual -82.8B
  • 5:00 Eurozone Trade Balance. Estimate 21.1B. Actual 22.7B
  • All Day – ECOFIN Meetings
  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US PPI. Estimate -0.2%
  • 8:30 US Retail Sales. Estimate -0.1%
  • 8:30 US Core PPI. Estimate 0.1%
  • 8:30 US Empire State Manufacturing Index. Estimate -4.1 points 
  • 9:00 US FOMC Member William Dudley Speaks
  • 9:15 US Capacity Utilization Rate. Estimate 76.8%
  • 9:15 US Industrial Production. Estimate -0.2%
  • 10:00 Preliminary UoM Consumer Sentiment. Estimate 92.7 points
  • 10:00 US Business Inventories. Estimate 0.0%
  • 10:00 US Preliminary UoM Inflation Expectations

*Key events are in bold

*All release times are EST

EUR/USD for Friday, January 15, 2016

EUR/USD January 15 at 5:25 EST

Open: 1.0857 Low: 1.0856 High: 1.0917 Close: 1.0905

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1087 1.1172
  • EUR/USD was uneventful in the Asian session and has posted gains in European trade
  • 1.0941 has weakened in resistance
  • 1.0847 is providing support
  • Current range: 1.0847 to 1.0941

Further levels in both directions:

  • Below: 1.0847, 1.0732, 1.0659 and 1.0537
  • Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, reflective of the lack of movement from the pair. Short positions command a strong majority (58%), indicative of trader bias towards the euro reversing directions and moving downwards.

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.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.