EUR/USD – Euro Climbs to 4-Week Highs on Talk of ECB Hike

EUR/USD is unchanged in the Monday session, after posting strong gains at the end of last week. Currently, the pair is trading at 1.0670. On the release front, there are no major releases in the eurozone or the US. ECB President Mario Draghi will deliver remarks at an event in Frankfurt.

The euro posted considerable gains on Friday, as some ECB policymakers raised the possibility of higher interest rates at last week’s policy meeting. At the meeting, the ECB held course and maintained interest rates at a flat 0.00%. The markets were left to pick up on nuances, as ECB President Mario Draghi noted that the central bank removed one phrase from its standard introductory statement – “using all the instruments available within its mandate”. Draghi stated that the removal of this phrase means that the ECB “no longer has a sense of urgency in taking further actions …. prompted by the risk of deflation”. With growth and inflation showing signs of improvement, the ECB has been under pressure to tighten policy and reduce its asset-purchase program. Germany, in particular, is unhappy with the ECB’s ultra-loose policy and on Thursday, German Finance Minister Wolfgang Schaeuble bluntly stated that he wanted to see a “timely start to the exit” from the ECB’s asset-purchase scheme. For his part, Mario Draghi must balance the improved economy with upcoming elections in the Netherlands and France. Euro-skeptics are a strong force throughout Europe and Draghi is reluctant to make any major moves in the middle of heated political campaigns.

The US economy delivered strong economic data on Friday. Nonfarm payrolls sparkled in February, as the indicator jumped to 235 thousand, easily beating the estimate of 196 thousand. Wage growth climbed 2.6% compared to February 2016, while the participation rate edged up to 63.0%, up from 62.9%. These numbers make it a virtual certainty that the Fed will raise rates by a quarter-point on Wednesday. Although a rate hike has been priced in by the markets, there have been disappointments in the past, so a rate move will likely give the dollar a boost against its major rivals, such as the euro. The solid job numbers also give President Trump a much-needed boost. Trump is under pressure to present an economic agenda, but the markets won’t mind giving him some additional breathing room with the economy performing well.

EU Leaders Keen to Be the Beacon of Free Trade

Only a Woeful Jobs Report Should Derail Fed Hike

EUR/USD Fundamentals

Monday (March 13)

  • 5:00 Italian Industrial Production. Estimate -0.6%
  • 9:30 ECB President Mario Draghi Speech
  • 10:00 US Labor Market Conditions Index

Upcoming Key Events

Tuesday (March 14)

  • 3:00 German Final CPI. Estimate 0.6%
  • 6:00 German ZEW Economic Sentiment. Estimate 13.2
  • 6:00 Eurozone Economic Sentiment. Estimate 19.3

*All release times are EST

*Key events are in bold

EUR/USD for Monday, March 13, 2017

EUR/USD March 13 at 5:40 EST

Open: 1.0689 High: 1.0714 Low: 1.0666 Close: 1.0670

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 was tested in resistance earlier and is a weak line

Further levels in both directions:

  • Below: 1.06016, 1.0506, 1.0414 and 1.0333
  • Above: 1.0708, 1.0873 and 1.0985
  • Current range: 1.0616 to 1.0708

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Monday session. Currently, long positions have a majority (55%), indicative of trader bias towards EUR/USD breaking out and moving 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.