The euro has inched lower on Monday, following sharp gains in the Friday session. Currently, EUR/USD is trading at 1.1180. It’s very quiet on the economic front, as there are no economic reports out of the eurozone or the US. In the US, we’ll hear from four FOMC members, and the markets will be looking for clues as to the Fed’s plans with regard to future rate hikes. On Tuesday, Germany and the eurozone will release Manufacturing PMI reports, as well as German Ifo Business Climate. In the US, the key release is New Home Sales.
There are no economic events in the US on Monday, so the markets will have a chance to focus on the Federal Reserve, with four FOMC members delivering speeches. The Fed has been keeping the markets on their toes in recent weeks regarding a rate hike. The central bank is expected to announce a rate hike at its June 14 meeting, but the odds of a hike have shown strong volatility. In late April, a rate hike was priced in at just 50%. The odds jumped higher in May but continue to show movement. Currently, the markets have priced in a hike at 78%, up from 73% on Friday. If the likelihood of a June move continue to fluctuate, the US dollar could also show some movement, as a rate hike will make US-dollar assets more attractive to investors.
The euro sparkled last week, as EUR/USD jumped 2.7 percent. On Friday, the euro gained one percent and punched past the 1.12 line for the first time since November. The US dollar was broadly lower last week, as President Trump endured one of his most difficult weeks since taking office. Trump’s administration was rocked by reports that he had asked former FBI director James Comey to end an investigation into connections between Russia and the Trump campaign team during the US election. If these accusations are true, Trump could be charged with committing obstruction of justice. President Trump fired back on Thursday, angrily denouncing this move as a “witch hunt”. The media and the Democrats have had a field day with Trump’s woes, and many Republicans are expressing unease with an administration that appears rudderless and is staggering from crisis to crisis. The ongoing turmoil in Washington has soured investors on the US dollar, and the euro has taken full advantage. However, with Trump out of the US on an official tour to the Middle East and Europe, the political tensions in Washington have receded, at least for now.
Monday (May 23)
- 6:00 German Buba Monthly Report
- All Day – Eurogroup Meetings
- 10:00 FOMC Member Patrick Harker Speaks
- 10:30 FOMC Member Neel Kashkari Speaks
- 19:00 FOMC Member Lael Brainard Speaks
- 21:10 FOMC Member Charles Evans Speaks
Tuesday (May 24)
- 3:30 German Flash Manufacturing PMI. Estimate 58.0
- 4:00 German Ifo Business Climate. Estimate 113.1
- 4:00 Eurozone Flash Manufacturing PMI. Estimate 56.5
- 10:00 US New Home Sales. Estimate 611K
*All release times are EDT
*Key events are in bold
EUR/USD for Monday, May 22, 2017
EUR/USD Monday, May 22 at 5:45 EDT
Open: 1.1195 High: 1.1210 Low: 1.1161 Close: 1.1180
EUR/USD has posted slight losses in the Asian and European sessions
- 1.1122 is providing support
- 1.1242 is the next line of resistance
Further levels in both directions:
- Below: 1.1122, 1.0985, 1.0873 and 1.0708
- Above: 1.1242, 1.1366 and 1.1465
- Current range: 1.1122 to 1.1242
OANDA’s Open Positions Ratio
EUR/USD ratio recorded strong gains in short positions on Friday, consistent with strong gains in EUR/USD. In the Monday session, short positions have a majority (72%), indicative of EUR/USD reversing directions and moving lower.
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