EUR/USD – Euro Hugs 1.06 as US Markets Closed for Holiday

EUR/USD has dipped slightly in the Monday session. Currently, the pair is trading at the 1.06 line. On the release front, it’s a very quiet start to the week. The only event on the calendar was Eurozone Trade Balance. The surplus widened to EUR 22.7 billion in November, but this fell short of the forecast of EUR 23.2 billion. US markets are closed for Martin Luther King Day, so there are no US events on the calendar. On Tuesday, Germany will release ZEW Economic Sentiment. The indicator is expected to jump to 18.5 points.

US consumers remain confident about the economy, although the markets had expected a stronger performance from the UoM Consumer Sentiment for January. The indicator was almost unchanged at 98.1, shy of the forecast of 98.6. Despite the optimism, US retail sales were a mix during the December holiday season. Retail Sales improved to 0.6%, edging above the estimate of 0.5%. However, much of the increase in spending was attributable to automobile sales, at the expense of other sectors of the economy. This was reflected in Core Retail Sales (which excludes car sales), which remained stuck at 0.2%, compared to a forecast of 0.5%. Still, analysts are confident that a bullish consumer will translate into strong spending numbers in the next few months. There was good news on the inflation front, as wholesale prices (measured by PPI) rose 0.3%, beating the forecast of 0.1%. This marked the third rise in four months, as inflation is pointing upwards due to higher oil prices. If inflation continues to climb towards the Federal Reserve target of 2.0%, we could see the Fed step in and raise interest rates. On Thursday, FOMC member Patrick Harker took note of the strong US economy and projected three “modest” rates from the Fed in 2017.  We’ll get another look at key inflation numbers on Wednesday, with the release of CPI and Core CPI.

The ECB will hold its first policy meeting in the New Year on Thursday. Recent numbers from the Eurozone have been encouraging, as growth and inflation numbers have shown improvement. Still, it’s doubtful that the ECB will start the year with significant changes to monetary policy, as plenty of slack remains the Eurozone economy. In December, the bank extended its asset-purchase program until December 2017, but also cut the size of the program from EUR 80 billion to 60 billion. These parameters are unlikely to change until policymakers see a significant improvement in growth and inflation numbers.

Fed’s Harker Sees 3 Rate Hikes in 2017

EUR/USD Fundamentals

Monday (January 16)

• 10:00 Eurozone Trade Balance. Estimate 23.2B

Tuesday (January 17)

• 10:00 German ZEW Economic Sentiment. Estimate 18.9

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, January 16, 2017

EUR/USD January 16 at 10:40 GMT

Open: 1.0627 High: 1.0635 Low: 1.0587 Close: 1.0584

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted slight losses in European trade
• 1.0506 is providing support
• 1.0616 is a weak resistance line

Further levels in both directions:

• Below: 1.0506, 1.0616, 1.0506 and 1.0414
• Above: 1.0616, 1.0708, 1.0873 and 1.0985
• Current range: 1.0506 to 1.0616

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little change in the Monday session. Currently, long and short positions are evenly split, indicative of a lack of trader bias as to which direction EUR/USD will take next.

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.