EUR/USD – Euro Subdued as Markets Digest Mixed US Data

The euro has ticked lower on Friday, as EUR/USD is trading at 1.1230. On the release front, there are no major events in the Eurozone. The US will release CPI and the UoM Consumer Sentiment report. The estimate for CPI is a weak gain of 0.1%, and UoM Consumer Sentiment is expected to improve slightly to 91.0 points.

US retail sales reports for August disappointed the markets. Retail Sales, the primary gauge of consumer spending, declined 0.3% in August, marking its first decline in five months. There was no relief from Core Retail Sales, which fell 0.1% and missed expectations. These weak numbers, which point to softer spending by the US consumer, have reduced the likelihood of rate hike in 2016 – a September hike is currently priced in at 12%, while the likelihood of a December move has fallen to 40%. These numbers will likely shift after the release of CPI and consumer confidence numbers on Friday, but it appears a safe bet that a September rate hike is off the table.

With a crucial Federal Reserve policy meeting on September 21, the Fed has imposed a blackout period on public comments from FOMC members. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. FOMC member Eric Rosengren recently came out in support of a rate hike, saying that “tightening is likely to be appropriate”, and went as far as to say that the US economy could overheat if the Fed didn’t act soon. Earlier this week, FOMC member Lael Brainard sounded much more cautious, saying it would be prudent to maintain a loose monetary policy. Brainard noted global uncertainties and weak inflation as reasons for the Fed not to rush into raising rates.

There were no surprises from Eurozone CPI data in August. Final CPI remained unchanged at 0.2%, unchanged from a month earlier. The indicator has not risen above 0.3% in 2016, pointing to persistent low inflation levels on the continent. Germany, the largest economy in the Eurozone is also struggling with weak inflation. Final CPI dropped to 0.0% in August, down from 0.3% a month earlier. WPI posted a small gain of 0.1%, but this was enough to beat the forecast of -0.7%. The ECB has been reluctant to adopt further monetary easing, but may have to consider hinting at further action in order to restore market confidence in a Eurozone economy which is beset by weak growth and low inflation.

EUR/USD Fundamentals

Friday (September 16)

  • 8:00 Italian Trade Balance. Estimate 7.80B. Actual 3.67B
  • 12:30 US CPI. Estimate 0.1%
  • 12:30 US Core CPI. Estimate 0.2%
  • 14:00 US Preliminary UoM Consumer Sentiment. Estimate 91.0
  • 14:00 US Preliminary UoM Inflation Expectations
  • 20:00 US TIC Long-Term Purchases. Estimate 30.2B

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, September 16, 2016

EUR/USD September 16 at 8:50 GMT

Open: 1.1246 High: 1.1248 Low: 1.1229 Close: 1.1234

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0957 1.1054 1.1150 1.1278 1.1376 1.1467
  • EUR/USD has shown little movement in the Asian and European sessions
  • 1.1278 remains an immediate resistance line
  • 1.1150 is providing support

Further levels in both directions:

  • Below: 1.1150, 1.1054, 1.0957 and 1.0821
  • Above: 1.1278, 1.1376 and 1.1467
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio has shown slight movement towards long positions. Currently, short positions have a majority (56%), indicative of trader bias towards EUR/USD breaking out and moving 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.