EUR/USD – Euro Ticks Higher Ahead of Draghi Speech

EUR/USD has recorded small gains in the Monday session. Currently, the pair is trading at 1.0730. On the release front, it’s a quiet start to the new trading week. Eurozone Consumer Confidence is expected to remain unchanged at -5 points. Later in the day, ECB President Mario Draghi will deliver remarks at an event in Torino, Italy. The markets will be listening closely, as the ECB held a policy meeting last week, opting to hold the line on interest rates and its asset-purchase program. There are no US releases on the schedule. On Tuesday, Germany and the Eurozone release Manufacturing PMIs, with both indicators expected to point to expansion in the manufacturing sector.

Donald Trump seems to be a magnet for controversy and his inauguration as president was no exception. The inauguration on Friday proceeded without incident, but anti-Trump protesters responded with a massive protest on Saturday in Washington, much to the irritation of Trump. Although there is an unwritten rule that a new president is granted 100 days of grace, this may not prove to be the case this time around. The bruising election campaign is still fresh, Trump is in a combative mood and continues to snipe at the media, so chivalry and goodwill may be lacking. As we enter uncharted territory and begin the Trump era, how will the US dollar react? 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

There were no surprises from the ECB, which last week held its first policy meeting of 2017. 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

Monday (January 23)

  • 6:00 German Buba Monthly Report
  • 10:00 Eurozone Consumer Confidence. Estimate -5 points
  • 18:30 ECB President Mario Draghi Speech

Upcoming Key Releases

Tuesday (January 24)

  • 3:30 German Flash Manufacturing PMI. Estimate 55.5
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.8

*All release times are EST

*Key events are in bold

EUR/USD for Monday, January 23, 2017

EUR/USD January 23 at 5:10 EST

Open: 1.0712 High: 1.0755 Low: 1.0708 Close: 1.0732

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0506 1.0616 1.0708 1.0873 1.0985 1.1114
  • EUR/USD posted slight gains in the Asian session and has inched lower in European trade
  • 1.0708 is a weak support level
  • 1.0873 is the next resistance line

Further levels in both directions:

  • Below: 1.0708, 1.0616, 1.0506 and 1.0414
  • Above: 1.0873, 1.0985 and 1.1114
  • Current range: 1.0708 to 1.0873

OANDA’s Open Positions Ratio

In the Monday session, EUR/USD ratio is showing short positions with a majority (55%). This is indicative of trader bias towards EUR/USD continuing to move higher.

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.