Euro Steady, ECB Minutes Show Support for Draghi

It’s been an uneventful week for EUR/USD, and this trend has continued on Friday. In the European session, EUR/USD is trading slightly below the 1.14 line. On the release front, there are no major releases on the schedule. German Trade Balance beat expectations, but French Industrial Production was well short of the forecast. In the US, the sole release is Wholesale Sales, with the markets expecting a decline of 0.2%. We’ll also hear from two FOMC members, Esther George and William Dudley.

The ECB released the minutes of its March policy meeting. At that meeting, the ECB implemented significant monetary steps, lowering all three of its interest rates and increasing its asset-purchase program (QE) from EUR 60 billion to 80 billion/mth. The main refinancing rate was cut from 0.05% to a flat 0.0%. The ECB has pumped some EUR 700 billion into its asset-purchase program, but the results have been disappointing, as the Eurozone continues to grapple with weak growth and inflation levels. The minutes indicated that the ECB Governing Council was broadly unified behind ECB president Mario Draghi, supporting the monetary package which the ECB adopted at the March meeting. The minutes acknowledged the difficult situation of the Eurozone economy, noting that the pace of recovery is expected to remain weak and uncertainties in the global economic environment pose significant risks to the Eurozone. Governing Council members also called for structural reforms, a theme that has often been mentioned by Draghi.

The Federal Reserve released the minutes of its March policy meeting on Wednesday, and the tone was dovish. The minutes indicated that the Fed is unlikely to raise rates before June at the earliest. Although some policymakers expressed approval for a rate hike in April, others expressed concern about the risks to the US economy posed by global economic conditions. There was a split amongst members as to whether the recent pickup in inflation was sustainable. Many Fed members were worried about the lack of options available to the Fed since rates remain close to zero. This concern can have significant impact on the currency markets, since the dollar could strengthen if the Fed is unable to implement effective easing measures. The minutes appear to be a validation of Janet Yellen’s remarks last week, which were very dovish and dampened growing enthusiasm about a rate hike as early as April. What can we expect from the Fed in 2016? There is a strong likelihood that the Fed will raise rates twice during the year, but the timetable of any moves is unclear. At a panel discussion on Thursday, Yellen said she did not consider the December rate hike a mistake and said that the Fed was monitoring the economy very carefully.

EUR/USD Fundamentals

Friday (April 8)

  • 00:15 FOMC Member Esther George Speaks
  • 6:00 German Trade Balance. Estimate 19.2B. Actual 19.8B
  • 6:45 French Government Budget Balance. Estimate -25.6B
  • 6:45 French Industrial Production. Estimate -0.3%. Actual -1.0%
  • 12:30 FOMC Member William Dudley Speaks
  • 14:00 US Wholesale Inventories. Estimate -0.2%

*Key events are in bold

*All release times are GMT

EUR/USD for Friday, April 8, 2016

EUR/USD April 8 at 10:00 GMT

Open: 1.1366 Low: 1.1349 High: 1.1394 Close: 1.1385

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1172 1.1278 1.1378 1.1495 1.1609 1.1712
  • EUR/USD has shown limited movement in the Asian and European sessions
  • 1.1378 has switched to a support role. It is a weak line and could see further action during the day
  • 1.1495 is as strong resistance line

Further levels in both directions:

  • Below: 1.1378, 1.1278, 1.1172 and 1.1087
  • Above: 1.1495, 1.1609 and 1.1712
  • Current range: 1.1378 to 1.1495

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged on Friday, consistent with limited movement by EUR/USD. Short positions have a strong majority (64%), indicative of strong trader bias towards EUR/USD moving 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.