EUR/USD – Euro in Holding Pattern Ahead of Expected Fed Move

EUR/USD remains under pressure, as the pair has dropped closed to the 1.06 line. Currently, the pair is trading at 1.0630. On the release front, Eurozone Employment Change edged up to 0.3%, above the forecast of 0.2%. In the US, it’s a busy day. Retail sales and CPI indicators are expected to soften in February. Today’s highlight is the Federal Reserve policy meeting, with the central bank widely expected to raise the benchmark rate a quarter-point, from 0.50% to 0.75%. On Thursday, the eurozone releases Final CPI, while the US publishes a host of key indicators, led by unemployment claims.

German numbers were a mixed bag on Tuesday. There was further indication that inflation continues to improve, as Final CPI rebounded with a gain of 0.6%, compared to a 0.6% decline a month earlier. The well-respected ZEW Economic Sentiment report improved to 12.8, although the markets had expected a stronger reading. Eurozone ZEW Economic Sentiment climbed to 25.6, its strongest gain since December 2015.

The eurozone continues to post improved inflation and growth data, and this has led to calls in some quarters for the ECB to tighten monetary policy. The ECB has kept the benchmark rate at a flat 0.0%, and its asset-purchase program does not expire until December. Will ECB President Mario Draghi taper the monthly purchases or at least signal such an intent? Draghi is doing his best to perform a complicated balancing act. A stronger economy would favor tighter policy, but he does not want ECB to become entangled in heated political contests in Europe. Dutch voters are having their say on Wednesday, while France holds elections in April, followed by Germany in September.

With the markets expecting a quarter-point rate hike on Wednesday, will the currency markets react to a Fed move? Although a rate hike has been priced in by the markets at 93%, there have been disappointments in the past, so a rate move could boost the dollar at the expense of gold. Strong US employment numbers in February have reinforced market speculation that the Fed will raise rates for the first time this year. 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 solid job numbers have also provided President Trump with 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 so well.

Fed to Walk the Talk

Wednesday, March 15

  • 3:45 French Final CPI. Estimate 0.1%. Actual 0.1%
  • 5:00 Italian Retail Sales. Estimate 0.1%. Actual 1.4%
  • 6:00 Eurozone Employment Change. Estimate 0.2%. Actual 0.3%
  • Tentative – German 30-y Bond Auction
  • 8:30 US CPI. Estimate 0.0%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Core Retail Sales. Estimate 0.1%
  • 8:30 US Retail Sales. Estimate 0.2%
  • 8:30 US Empire State Manufacturing Index. Estimate 15.3
  • 10:00 US Business Inventories. Estimate 0.3%
  • 10:00 US NAHB Housing Market Index. Estimate 65
  • 10:30 US Crude Oil Inventories. Estimate 3.3M
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <1.00%
  • 14:00 US FOMC Press Conference
  • 16:00 US TIC Long-Term Purchases. Estimate 13.4B

Upcoming Key Events

Thursday, March 16

  • 6:00 Eurozone Final CPI. Estimate 2.0%
  • 8:30 US Building Permits. Estimate 1.26M
  • 8:30 US Philly Fed Manufacturing Index. Estimate 30.2
  • 8:30 US Unemployment Claims. Estimate 245K
  • 10:00 US JOLTS Openings. Estimate 5.45M

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, March 15, 2017

EUR/USD March 15 at 6:40 EST

Open: 1.0612 High: 1.0639 Low: 1.0611 Close: 1.0628

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0414 1.0506 1.0616 1.0708 1.0873 1.0985

EUR/USD has edged upwards in the Asian and European sessions

  • 1.0616 was tested in support earlier and remains a weak line
  • 1.0708 is the next resistance line

Further levels in both directions:

  • Below: 1.0616, 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 is showing limited movement in the Wednesday session. Currently, long and short positions are almost an even split, indicative of a lack of trader bias towards 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.