EUR/USD – Euro Steady as Catalonia Suspends Declaration of Independence

The euro has ticked higher on Wednesday. Currently, EUR/USD is trading at 1.1837, up 0.07% on the day. There are no Eurozone events on the schedule. The US will release JOLTS Job Openings, which is expected to ease slightly to 6.13 million. Today’s highlight is the Federal Reserve minutes from the September policy meeting. On Thursday, the US releases PPI and unemployment claims. As well, ECB President Mario Draghi will speak at an event in Washington.

After much anticipation and tension, Catalan President Carles Puigdemont declared independence – sort of. Puigdemont did make a symbolic declaration, but immediately said that that no formal steps would be taken before giving a chance to negotiations with the Spanish government. The Catalan leader was under huge pressure not to make any irreversible moves, as Madrid warned it would not tolerate any unilateral moves, and the European Union also urged dialogue between the parties. Global stock markets rose after the news, and the euro has posted slight gains, as investors are clearly relieved. However, the crisis is by no means over, as the Spanish government continues its hard line towards any attempt at secession by Catalonia. Although Catalan leaders say they have a mandate for independence based on the referendum (in which 90% voted for independence), Catalans are deeply divided over the issue. Several banks and major companies have announced they will move their legal headquarters from Barcelona to Madrid, and the constitutional crisis could take a toll on the Spanish economy if the stalemate continues.

The Federal Reserve will release its minutes from the September meeting. As expected, the Fed did not raise interest rates at that meeting, but did announce it would begin trimming its $4.2 billion balance sheet in October. This is seen as a vote of confidence in the US economy, which continues to show strong growth. At time of the September meeting, the odds of December rate hike were pegged around 50 percent. However, the odds have climbed to 87 percent. The primary reason for the huge shift in market sentiment can be attributed to Fed policymakers coming out in support of a rate hike, notably Fed Chair Janet Yellen. The lack of inflation remains the most significant impediment to raising rates, but Yellen and other FOMC members have insisted that strong economic conditions will lead to higher inflation levels. Even if inflation does not move higher before 2018, the Fed now appears ready to press the rate trigger.

Europe Higher as Catalans Seek Talks With Madrid

EUR/USD Fundamentals

Wednesday (October 11)

• 10:00 US JOLTS Job Openings. Estimate 6.13M
• 13:01 US 10-year Bond Auction
• 14:00 US FOMC Minutes

Thursday (October 12)

• 8:30 US PPI. Estimate 0.4%
• 8:00 US Unemployment Claims. Estimate 251K
• 10:30 ECB President Mario Draghi Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Wednesday, October 11, 2017

EUR/USD Wednesday, October 11 at 5:15 EDT

Open: 1.1809 High: 1.1842 Low: 1.1795 Close: 1.1818

EUR/USD Technical

EUR/USD gained ground in the Asian session and has inched higher in European trade

• 1.1712 is providing support
• 1.1876 is the next resistance line

Further levels in both directions:

• Below: 1.1712, 1.1611, 1.1489 and 1.1366
• Above: 1.1876, 1.1996 and 1.2018
• Current range: 1.1712 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD ratio remains unchanged this week. Currently, short positions have a majority (60%), indicative of EUR/USD reversing directions and moving to lower ground.

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