EUR/USD – Euro in Holding Pattern Ahead of Fed Statement

EUR/USD is drifting on Wednesday, as the pair trades slightly below the 1.11 line in the European session. On the release front, there is only one Eurozone release – German 10-year Bond Auction. It’s a busy day in the US, highlighted by the Federal Reserve rate announcement and policy statement. The US will also release CPI and Building Permits reports. On Thursday, there are two key events in the US – Building Permits and the Philly Fed Manufacturing Index.

The Federal Reserve will be on center stage on Wednesday, as the Fed will set interest rates and issue a policy statement. Most experts are expecting the Fed to remain on the sidelines and not raise rates, given current economic conditions. Although the US economy continues to expand, growth has been softer in 2016 compared to the red-hot pace which marked the economy in the second half of 2015. The primary trouble spot in the economy is the inflation picture, as inflation levels remains very low, a result of weak global demand and low oil prices. Fed policymakers are divided on how to respond to persistently low inflation. Some FOMC members favor preempting inflation with a rate hike, while others feel that the economy is currently too fragile for such a move.

The markets are confident that the Federal Reserve won’t raise rates at the upcoming Fed meeting, but there is intense interest in the Fed’s “dot plot” (a chart of rate hike expectations released each quarter). When the Fed raised interest rates in December, the dot plot called for four hikes in 2016 and projected rates would be between 1.25% and 1.50% by the end of 2016. Many experts have argued that the dot plot is not in sync with market projections of rate increases, and the December dot plot releases appears to bolster their argument. With the cooling off of the US economy early in 2016, the March dot plot is likely to project two or three rate moves in 2016, but many market players see the Fed opting not to raise rates again until next year.

EUR/USD Fundamentals

Wednesday (March 16)

  • Tentative – German 10-year Bond Auction
  • 12:30 US Building Permits. Estimate 1.20M
  • 12:30 US CPI. Estimate -0.2%
  • 12:30 US Core CPI. Estimate +0.2%
  • 12:30 US Housing Starts. Estimate 1.15M
  • 13:15 US Capacity Utilization Rate. Estimate 76.9%
  • 13:15 US Industrial Production. Estimate -0.2%
  • 14:30 US Crude Oil Inventories. Estimate 2.9M
  • 18:00 US FOMC Economic Projections
  • 18:00 US FOMC Statement
  • 18:00 US Federal Funds Rate. Estimate <0.50%
  • 18:30 US FOMC Press Conference

Upcoming Key Events

Thursday (March 17)

  • 8:30 US Philly Fed Manufacturing Index. Estimate -1.4
  • 8:30 US Unemployment Claims. Estimate 267K

*Key events are in bold

*All release times are GMT

EUR/USD for Wednesday, March 16, 2016

EUR/USD March 16 at 10:20 GMT

Open: 1.1107 Low: 1.1074 High: 1.1112 Close: 1.1090

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0847 1.0941 1.1087 1.1172 1.1278 1.1387
  • EUR/USD was flat in the Asian session and this trend has continued in European trade
  • 1.1087 remains busy and is a weak support line. It was tested earlier and could break during the day
  • There is resistance at 1.1172

Further levels in both directions:

  • Below: 1.1087, 1.0941, 1.0847 and 1.0708
  • Above: 1.1172, 1.1278 and 1.1387

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged, consistent with the lack of movement from EUR/USD. Short positions have a strong majority (58%), indicative of strong trader bias towards EUR/USD breaking out of range and heading to lower levels.

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.