EUR/USD – Euro Dips Lower Ahead of German Economic Sentiment

EUR/USD continues to lose ground this week, as the pair trades slightly above the 1.11 line in the Tuesday session. Today’s highlights are the German and Eurozone ZEW Economic Sentiment reports, with the markets expecting both indicators to show improvement for October. There are no major releases out of the US. On Wednesday, the Federal Reserve will release the minutes of its September policy meeting, in which it held rates at 0.25%. As well, FOMC members William Dudley and Esther George will speak at public engagements.

Despite a weak economy and serious concerns about Brexit, the Eurozone Sentix Investor Confidence report was up sharply in October. The indicator improved to 8.5 points, well above expectations and climbing to a 4-month high. Will Tuesday’s ZEW economic confidence reports follow suit? German ZEW Economic Sentiment posted a weak gain of 0.5 points in September, but the markets a much stronger October release, with an estimate of 4.2 points. The Eurozone report is also expected to improve, with a forecast of 6.3 points. If the indicators meet or beat their estimates, the euro, which has dropped close to 200 points this week, could reverse directions and make up some of these losses.

The Federal Reserve will be back in the spotlight on Wednesday, with the release of the policy minutes of the September meeting. At the meeting, three of ten members voted in favor of an immediate rate hike, underscoring growing dissent with the Fed’s cautious monetary stance, which has resulted in zero rate hikes in 2016. The US economy is in good shape, with weak inflation levels being the main sore point. The likelihood of a December rate hike has increased to 65 percent, despite a lukewarm payrolls report for September. As we approach the December policy meeting, key economic indicators will be closely monitored for their effect on a rate move, and unexpected readings could cause strong volatility in the currency markets.

 

EUR/USD Fundamentals

Tuesday (October 11)

  • 9:00 German ZEW Economic Sentiment. Estimate 4.2
  • 9:00 Eurozone ZEW Economic Sentiment. Estimate 6.3
  • 10:00 NFIB Small Business Index. Estimate 95.2
  • 14:00 US Labor Market Conditions Index

*All release times are EDT

* Key events are in bold

EUR/USD for Tuesday, October 11, 2016

EUR/USD October 11 at 7:55 GMT

Open: 1.1140 High: 1.1140 Low: 1.1106 Close: 1.1109

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0821 1.0957 1.1054 1.1150 1.1278 1.1376
  • EUR/USD was choppy in the Asian session and has posted slight losses in European trade
  • 1.1054 is providing support
  • 1.1150 switched to a resistance role following losses by EUR/USD in the Monday session

Further levels in both directions:

  • Below: 1.1054, 1.0957 and 1.0821
  • Above: 1.1150, 1.1278, 1.1376 and 1.1467
  • Current range: 1.1050 to 1.1150

OANDA’s Open Positions Ratio

EUR/USD ratio has reversed directions and is showing gains in long positions. Currently, short positions have a small majority (52%), indicative of very slight 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.