EUR/USD – Euro Flat, Markets Eye ECB Statement

EUR/USD is showing marginal movement on Wednesday, following gains which marked the pair in the Tuesday session. The pair is trading at 1.1360 in the European session. On the release front, German PPI posted a small gain of 0.2%, missing the estimate. ECB head Mario Draghi will deliver a speech in Frankfurt. Later in the day, the US releases Existing Home Sales as well as Crude Oil Inventories. Thursday will be busy, highlighted by the ECB rate decision. The US releases the Philly Fed Manufacturing Index and Unemployment Claims, both key indicators.

Is inflation showing signs of life in the Eurozone? Weak inflation levels have underscored soft economic growth in the bloc, and the threat of deflation remains a constant worry for policymakers. However, there have been some encouraging signs on the inflation front. Last week, there were strong CPI numbers out of Germany and France, the two largest economies in the bloc. On Wednesday, German PPI improved to 0.0%, ending a streak of seven straight declines. Still, inflation levels are far below the ECB target of about 2.0%, despite significant monetary moves by the central bank in March, such as cutting interest rates and expanding the ECB asset-purchase program. In March, ECB president Mario Draghi stated that the ECB would not lower interest rates anytime soon, which would leave the ECB with limited monetary options. Will the ECB make any moves at the policy meeting on Thursday? Even if the ECB remains on the sidelines, the markets will be giving Mario Draghi their full attention, as his comments following the ECB statement can quickly inject volatility into the currency markets.

The euro posted gains on Tuesday, in response to strong ZEW Economic Sentiment reports from the Eurozone and Germany. The Eurozone indicator climbed 21.5 points, crushing the estimate of 13.9 points. The German ZEW report improved to 11.2 points, above the forecast of 8.2 points and marking a 4-month high. The reports point to increased optimism and could signal that the Eurozone and German economies are gaining strength.

Oil prices have shown strong volatility since the weekend, when oil producers attended a meeting in Qatar on Sunday. The gathering, which included OPEC and non-OPEC nations, ended in disarray, without any agreement being reached by the participants. There was optimism that the parties might agree to maintain current production levels, but hopes for even this limited move were dashed when Saudi Arabia insisted that any agreement had to cover Iran. When this didn’t materialize, the participants closed up shop and returned home. The failure of the talks could severely undermine the credibility of oil producers, and the huge oversupply of crude could worsen if Saudi Arabia and other suppliers decide to increase output. Oil prices have zigzagged since the weekend. Initially, prices sagged after the inconclusive oil meeting, but have since rebounded sharply.

EUR/USD Fundamentals

Wednesday (April 20)

  • 6:00 German PPI. Estimate 0.2%. Actual 0.0%
  • 10:00 ECB President Mario Draghi Speaks  
  • Tentative – German 10-year Bond Auction
  • 14:00 US Existing Home Sales. Estimate 5.29M
  • 14:30 US Crude Oil Inventories. Estimate 2.2M

Upcoming Key Events

Thursday (April 21)

  • 11:45 ECB Mininum Bid Rate. Estimate 0.00%
  • 12:30 ECB Press Conference
  • 12:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
  • 12:30 US Unemployment Claims. Estimate 265K

*Key events are in bold

*All release times are GMT

EUR/USD for Wednesday, April 20, 2016

EUR/USD April 20 at 8:55 GMT

Open: 1.1358 Low: 1.1348 High: 1.1374 Close: 1.1361

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1087 1.172 1.1278 1.1378 1.1495 1.1609
  • EUR/USD has shown limited movement in the Asian and European sessions
  • 1.1378 is a weak resistance line
  • 1.1278 is providing support

Further levels in both directions:

  • Below: 1.1278, 1.1172, 1.1087 and 1.0989
  • Above: 1.1378, 1.1495 and 1.1609
  • Current range: 1.1278 to 1.1378

OANDA’s Open Positions Ratio

EUR/USD ratio remains unchanged this week, consistent with the lack of movement from EUR/USD. Short positions continue to command a strong majority (60%). This is indicative of strong trader bias towards EUR/USD breaking out and 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.