EUR/USD – Euro Dips as Eurozone CPI Declines

EUR/USD is lower on Thursday, following moderate gains in the Wednesday session. The pair is trading slightly above the 1.12 line. On the release front, Eurozone Final CPI declined 0.1%, matching the forecast. In the US, it’s a busy day, highlighted by consumer inflation reports and unemployment claims.

As widely expected, the Federal Reserve opted for the sidelines at its policy meeting and held the benchmark rate at 0.25%, where it has been pegged since December 2015. A dismal Nonfarm Payrolls report and dovish statements from Fed chair Janet Yellen and her colleagues had all but decimated any chance of a June hike. Back in April, Fed chair Janet Yellen had renewed hopes of rate hike in the summer, when she said that she expected a rate hike in “the coming months”. The Fed’s tone has drastically changed since then, and there is a strong likelihood that the Fed will raise rates only once in 2016. The Fed statement did not shed any light on the timing of a rate hike, although many analysts are circling September in their calendars. The statement was cautious in tone, stating that the Fed expects US inflation levels to remain at low levels in the near term. As well, the Fed lowered its rate path outlook for 2016 and 2017. Gone are the heady days in December, when the Fed hinted that it could raise rates up to four times in 2016. Many analysts were skeptical about this rosy (brash?) prediction, and it appears that the Fed was overly optimistic about the strength of the US economy.

With the Brexit referendum vote only a week away, the markets are showing jitters as recent polls show the “Leave” camp with a majority. The referendum on whether the UK will remain in the European Union has ramifications for the global economy, and key figures are weighing in on the repercussions if the UK votes to exit the EU. British Prime Minister David Cameron, Germany chancellor Angela Merkel and International Monetary Fund managing director Christine Lagarde have warned that a British departure could hurt the global economy. Federal Reserve Chair Janet Yellen has also weighed in, stating on Wednesday that the Brexit vote was a factor in the Fed holding rates at its policy meeting. On Tuesday, an anonymous ECB official stated that if the UK voted to depart the EU, the ECB would immediately announce that it was committed to supporting the financial markets and maintaining adequate market liquidity. This would involve opening “swap lines” with the BoE, so as to provide unlimited funding, in both euros and pounds, to European banks. Clearly, the EU is extremely concerned about the vote, which could have huge ramifications on the currency and financial markets if the “Leave” camp emerges victorious.

EUR/USD Fundamentals

Thursday (June 16)

  • 8:00 Economic Bulletin
  • 8:43 Spanish 10-year Bond Auction. Estimate 1.59%
  • 9:00 Eurozone Final CPI. Estimate -0.1%. Actual -0.1%
  • 9:00 Eurozone Final Core CPI. Estimate 0.8%. Actual 0.8%
  • All Day – Eurogroup Meetings
  • 12:30 US CPI. Estimate 0.3%
  • 12:30 US Core CPI. Estimate 0.2%
  • 12:30 US Philly Fed Manufacturing Index. Estimate 1.1
  • 12:30 US Unemployment Claims. Estimate 267K
  • 12:30 US Current Account. Estimate -125B
  • 14:00 US NAHB Housing Market Index. Estimate 59
  • 14:30 US Natural Gas Storage. Estimate 66B

Upcoming Key Releases

Friday (June 17)

  • 12:30 US Building Permits. Estimate 1.15M

* Key releases are in bold

*All release times are GMT

EUR/USD for Thursday, June 16, 2016

EUR/USD June 16 at 10:10 GMT

Open: 1.1261 Low: 1.1250 High: 1.1295 Close: 1.1224

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0909 1.1054 1.1150 1.1278 1.1376 1.1495
  • EUR/US posted gains in the Asian session but has reversed directions and posted losses in the European session
  • There is resistance at 1.1278
  • 1.1150 is providing support

Further levels in both directions:

  • Below: 1.1150, 1.1054 and 1.0909
  • Above: 1.1278, 1.1376, 1.1495 and 1.1638
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight movement towards short positions on Thursday. Short positions have a majority (58%), indicative of trader bias towards EUR/USD continuing to move to lower ground.

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.