EUR/USD – Euro Slips to 30-week Lows on Dovish Draghi

EUR/USD has posted losses on Friday, continuing the downward trend seen in the Thursday session. The pair is currently trading at 1.0880, its lowest level since March 7. On the release front, there are few cues for market players as the trading week wraps up. Eurozone Consumer Confidence, which has continually pointed to sharp pessimism, is expected to remain at -8 points. Today’s sole US event is a speech from FOMC member Daniel Tarullo.

There were no surprises from the ECB on Thursday, as the bank made no changes to interest rates or the bank’s asset-purchase program (QE). The ECB held rates at 0.00%, where they have been pegged since March. The QE scheme remained unchanged at EUR 80 billion/mth. There was some speculation that Draghi would make an announcement about the time-frame of the QE program, which will terminate at the end of March 2017 “or beyond, if necessary”, in the words of the ECB.  Draghi will likely make a decision on whether to extend QE following the release of the bank’s updated quarterly forecasts in December. The dovish stance taken by Draghi has pushed the euro lower, with EUR/USD dropping close to 100 points since Thursday.

Weak Eurozone inflation levels have long been a major headache for policymakers, who have had to deal with fears of deflation for much of 2016. However, September brought better tidings on the inflation front. Final CPI improved to 0.4%, matching the forecast. This marked the highest monthly gain since October 2014. Still, this modest gain remains well below the ECB’s inflation target of just below 2.0%, and the ECB may opt to raise QE levels in December in order to raise inflation.

US unemployment claims surprised the markets by climbing to 260 thousand, higher than the forecast of 251 thousand. This marked the first reading since August that the key indicator has not beat estimates. Still, the dollar didn’t lose any ground, as the 4-week daily average of jobless claims remains excellent. There was good news from the manufacturing front, as the Philly Fed Manufacturing Index posted a strong gain of 9.7 points, easily beating the forecast of 5.2 points. Earlier in the week, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 68 percent, as market sentiment remains high that the Fed will press the rate trigger before the end of the year.

EUR/USD Fundamentals

Friday (October 21)

  • 9:00 – German Buba President Weidmann Speaks
  • Day 2 – EU Economic Summit
  • 13:00 Belgian NBB Business Climate. Estimate -1.5
  • 14:00 Eurozone Consumer Confidence Estimate -8
  • 14:15 FOMC Member Daniel Tarullo Speaks

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, October 21, 2016

EUR/USD October 21 at 8:50 GMT

Open: 1.0929 High: 1.0929 Low: 1.0879 Close: 1.0882

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0616 1.0708 1.0821 1.0957 1.1054 1.1150
  • EUR/USD has posted small losses in the Asian and European sessions
  • 1.0821 is providing support
  • There is resistance at 1.0957

Further levels in both directions:

  • Below: 1.0821, 1.0708 and 1.0616
  • Above: 1.0957, 1.1054, 1.1150 and 1.1278
  • Current range: 1.0821 to 1.0957

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement. Currently, long positions have a strong majority (61%), indicative of trader bias towards EUR/USD reversing directions and moving upwards.

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.