EUR/USD – Euro Rises to 1-week High on Fed Statement

EUR/USD has posted gains on Thursday, continuing the upward movement seen in the Wednesday session. Currently, the pair is trading at 1.1230. On the release front, the markets continue to digest the Federal Reserve decision to maintain rates at 0.25%. There are no major releases out of Europe. In the US, today’s highlights are unemployment claims and existing housing sales.

As widely expected, the Federal Reserve maintained the benchmark interest rate at 0.25%, where it has been pegged since last December. In a highly unusual step, however, three of the ten FOMC members dissented with the decision. Esther George, Loretta Mester and Eric Rosengren voted against holding rates steady, preferring to raise rates immediately by a quarter-percentage point. This was the first time since December 2014 that three FOMC voting members have dissented with the Fed rate decision. This significant dissent underscores that Janet Yellen has been unable to “rally the troops” behind her leadership, with one economist calling the Fed decision “one of the most decisive FOMC meetings in recent memory”.

The Fed statement noted strong growth in employment and consumer spending, but added that business fixed investment remains weak. The Fed’s “dot plot” indicated that policymakers expect a quarter-rate hike before the end of the year. The Fed’s current stance is being called a “hawkish hold” as the Fed has put the markets on notice that a December rate hike is likely. Using typically bland language, the Fed stated that “the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Reading between the lines, the Fed is looking for stronger inflation numbers, and upcoming inflation indicators (as well as consumer spending and employment) will have a significant impact on the odds of a December rate hike. The Fed sounded dovish about future rate moves, scaling back projections for 2017 from three rate moves to just two hikes.

EUR/USD Fundamentals

Thursday (September 22)

• 8:00 ECB Economic Bulletin
• 12:30 US Unemployment Claims. Estimate 261K
• 13:00 ECB President Mario Draghi Speaks
• 13:00 US HPI. Estimate 0.3%
• 14:00 Eurozone Consumer Confidence. Estimate -8 points
• 14:00 US Existing Home Sales. Estimate 5.45M
• 14:00 US CB Leading Index. Estimate 0.0%
• 14:30 US Natural Gas Storage. Estimate 59B

*All release times are EDT

* Key events are in bold

EUR/USD for Thursday, September 22, 2016

EUR/USD September 22 at 13:00 GMT

Open: 1.1189 High: 1.1248 Low: 1.1184 Close: 1.1232

EUR/USD Technical

• EUR/USD showed limited movement in the Asian session. The pair has posted gains in European trade
• 1.1278 is 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 is showing little movement on Thursday. Currently, short positions have a slender majority (52%), indicative of slight trader bias towards EUR/USD reversing directions and moving higher.

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.