The euro has ticked higher on Monday, as EUR/USD has stabilized after recording sharp drops on Friday. Currently, EUR/USD is trading at 1.1170. On the release front, there are no major events out of the Eurozone or the US, so we can expect the pair to have an uneventful Monday session. Eurozone Current Account slipped to EUR 21.0 billion, marking the smallest surplus since February. The sole US event is the NAHB Housing Market Index. On Tuesday, the US will release Building Permits, a key event.
EUR/USD ended the week with losses of close to 100 points, as US consumer inflation releases in August were a bit better than expected. CPI posted a gain of 0.2%, edging above the forecast of 0.1%. It was a similar story with Core CPI, which rose 0.3%, compared to the forecast of 0.2%. CPI was up from 0.0% in July, with the rise being attributed to higher shelter and health care costs. If inflation indicators continue to rise, there is a greater chance of a rate hike in December, and increased speculation about a Fed hike could push the greenback to higher levels. The Federal Reserve will hold a policy meeting on September 21, and a rate hike is considered extremely unlikely, with a hike priced in at just 12 percent.
Ever since an upbeat speech from Janet Yellen in August, the markets have been speculating about the timing of the next Fed rate hike. However, recent economic numbers have been mixed, so the Fed is expected to remain on the sidelines on Wednesday, when it sets the benchmark rate. However, the Fed statement will be of intense interest, and the markets will be looking for clues regarding a December move. If Janet Yellen delivers a dovish message, the market’s mood could sour and the dollar could lose ground. 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. Will the rate picture clear up or remain fuzzy after the rate statement?
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.
Monday (September 19)
- 8:00 Eurozone Current Account. Estimate 27.2B. Actual 21.0B
- 10:00 German Buba Monthly Report
- 14:00 US NAHB Housing Market Index. Estimate 60 points
Tuesday (September 20)
12:30 US Building Permits. Estimate 1.17M
*All release times are EDT
* Key events are in bold
EUR/USD for Monday, September 19, 2016
EUR/USD September 19 at 10:20 GMT
Open: 1.1158 High: 1.1173 Low: 1.1150 Close: 1.1165
- EUR/USD has shown limited movement in the Asian and European sessions
- 1.1278 is a strong resistance line
- 1.1150 is providing weak support and could see action during the Monday session
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 movement towards long positions. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction EUR/USD will take next.
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