EUR/USD – Euro Steady as ECB Stands Pat

EUR/USD has recorded slight losses in the Friday session. Currently, the pair is trading at 1.0630. In economic news, today’s highlight is the Inauguration of Donald Trump as president. In the Eurozone, German PPI edged up to 0.4%, matching the forecast. In the US, the sole event is a speech from FOMC member from Patrick Harker.

It’s Inauguration Day in the United States, as the eyes of the world are on Donald Trump, who will be sworn in as the 45th president. Trump’s stunning victory in November has triggered strong gains for the US dollar and the stock market, and there is no arguing that the US economy is robust. Nonetheless, there is a feeling of unease in the air, as confidence and hope are starting to give way to confusion and uncertainty, as Trump has failed to outline any specifics on his economic policies, while continuing to tangle with the media and fire off controversial Twitter messages. How will the dollar react when Trump rolls up his sleeves and begins work on Monday morning? Earlier on Friday, Oanda’s Stephen Innes provided this assessment:

the downside risk for the USD remains elevated more so from Trump’s inauguration if he fails to underscore economic policy. On the other hand, if Donald comes out firing on all fiscal stimulus cylinders, bond yield will surge, and the greenback would catch an enormous updraft… the President–elect takes centre stage as we begin a new chapter in American politics and global financial markets. Buckle up; we are likely in for a wild ride in the coming 100 days [see the link below for the full article]

We begin a new chapter for the US Dollar

It was more of the same from the ECB, which held its first policy meeting of 2017 on Thursday. The bank maintained its ultra-easy monetary policy, keeping interest rates at 0.00%, where they have been pegged since March 2016. The ECB made no changes to its asset-purchase program (QE), which is scheduled to continue until December 2017, at a pace of EUR 60 billion/mth. ECB President Mario Draghi acknowledged that the Eurozone was experiencing an improvement in growth and stronger inflation, but insisted that there were still risks ahead. Draghi urged patience on the part of Germany, which wants to see the ECB tighten monetary policy. With Germany holding elections later this year, German politicians and policymakers could become more vocal in their criticism of the ECB. On the inflation front, the picture continues to improve, as indicators pointed upwards in December. German PPI edged up to 0.4% and Eurozone Final CPI jumped 1.1%, its strongest showing in over three years. Inflation levels are currently about halfway to the ECB’s target of 2 percent. If the trend continues, we could see the ECB tighten monetary policy by raising rates or tapering its QE scheme.

EUR/USD Fundamentals

Friday (January 20)

  • 2:00 German PPI. Estimate 0.4%. Actual 0.4%
  • 9:00 US FOMC Member Patrick Harker Speech
  • Tentative – President Trump Inauguration Speech

*All release times are EST

*Key events are in bold

EUR/USD for Friday, January 20, 2017

EUR/USD January 20 at 6:10 EST

Open: 1.0628 High: 1.0670 Low: 1.0627 Close: 1.0631

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0414 1.0506 1.0616 1.0708 1.0873 1.0985
  • EUR/USD posted slight gains in the Asian session but has retracted in European trade
  • 1.0616 is providing support
  • 1.0708 is the next resistance line

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio has showed minimal movement this week. Currently, short and long positions are almost an even split, indicative of a lack of trader bias as to what 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.

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.