EUR/USD – Euro Unchanged, Markets Eye Eurozone CPI

EUR/USD is showing limited movement in the Wednesday session. Currently, the pair is trading at 1.0720. On the release front, there are no Eurozone events on the schedule. In the US, today’s highlight is PPI. On Thursday, the Eurozone releases CPI. There are a host of major US events, led by CPI. As well, Fed chair Janet Yellen will testify before the Congressional Joint Economic Committee.

Economic sentiment continues to improve in the Europe, according to ZEW (Center of European Economic Research) surveys in the Eurozone and Germany. The surveys provide a snapshot of the mood of institutional investors and analysts. The German report showed a sharp gain of 13.8 points, well above the forecast of 7.9 points. The Eurozone release improved to 15.8, above the estimate of 7.9. Both indicators posted 4-month highs and pointed to strong optimism over economic growth on the continent. However, the head of the ZEW, Achim Wambach, sounded a note of caution, saying that confidence has decreased since the Trump election victory. Wambach said that Trump’s economic plans are “thin and show no policy rationale” and the election has ushered in a period of uncertainty. This could spell bad news for the euro, which has dropped 3.4 percent since November 7.

As the dust settles from last week’s election shocker, what can we expect from President Trump? The markets went on a roller-coaster ride after the election, but appear to have settled down. Market sentiment is currently very favorable towards the dollar, as a Trump presidency (together with a Republican-controlled Congress) could signal a looser fiscal policy and a cut in taxes. This would likely result in greater inflation, which would lead to higher interest rates and hence a stronger dollar. At the same time, Trump is a political enigma, and aside from being “pro-business” he has been very short on specifics with regard to an economic platform. This lack of certainty means the markets could be in for plenty of surprises which could translate into volatility in the currency markets.

With the Federal Reserve meeting for a policy next month, expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we’ll see a rate hike before the end of 2016.

Fed Hike Odds Near 100%

EUR/USD Fundamentals

Wednesday (November 16)

• 8:05 US FOMC Member James Bullard Speech
• 13:30 US PPI. Estimate 0.3%
• 13:30 US Core PPI. Estimate 0.2%
• 14:15 US Capacity Utilization Rate. Estimate 75.5%
• 14:15 US Industrial Production. Estimate 0.2%
• 15:00 US NAHB Housing Market Index. Estimate 63 points
• 15:30 US Crude Oil Inventories. Estimate 0.4M
• 21:00 US TIC Long-Term Purchases. Estimate 32.9B

Thursday (November 17)

• 10:00 Eurozone Final CPI. Estimate 0.4%
• 13:30 US Building Permits. Estimate 1.19M
• 13:30 US CPI. Estimate 0.4%
• 13:30 US Core CPI. Estimate 0.2%
• 13:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
• 13:30 US Unemployment Claims. Estimate 257K
• 15:00 US Fed Chair Janet Yellen Testifies

*All release times are GMT

* Key events are in bold

EUR/USD for Wednesday, November 16, 2016

EUR/USD November 16 at 9:10 GMT

Open: 1.0724 High: 1.0760 Low: 1.0700 Close: 1.0718

EUR/USD Technical

• EUR/USD has shown limited movement in the Asian and European sessions
• 1.0708 was tested earlier in support and is a weak line
• There is resistance at 1.0821

Further levels in both directions:

• Below: 1.0708, 1.0616 and 1.0506
• Above: 1.0821, 1.0957, 1.1054 and 1.1150
• Current range: 1.0708 to 1.0821

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Wednesday session. Currently, short positions have a majority (63%), 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.