EUR/USD – Euro Steady Ahead of ECB Meeting

The euro is almost unchanged in the Thursday session, after gains on Wednesday. Currently, EUR/USD is trading at 1.1811, down 0.02% on the day. On the release front, German GfK Consumer Climate edged lower to 10.7, close to the forecast of 10.8 points.  The ECB will release its rate statement, and is expected to taper its asset purchase program. There are two key indicators in the US – unemployment claims and Pending Home Sales. On Friday, the US releases Advance GDP and the UoM Consumer Sentiment.

All eyes are on the ECB, which holds a policy meeting on Thursday. The Bank is expected to maintain interest rates at a flat 0.00%, but could significantly trim the ECB’s asset purchase program (QE). Currently, the ECB is purchasing EUR 60 billion/mth, and there is a strong likelihood that this amount will drop to EUR 30 billion/mth. The stronger eurozone economy is the catalyst behind a taper, but with inflation persistently at low levels, the ECB is expected to announce to extend the program well into 2018 or even later. Eurozone members remain divided as to whether the ECB should signal that it plans to wind up QE. Germany and the Netherlands are in favor of a quick exit, but other members want the scheme to remain open-ended, so that the ECB can continue with extensions, if needed. ECB policymakers will need to perform a balancing act between these views as it shifts its monetary policy.

ECB Decision: “Lower for Longer” or “Higher for Shorter”?

The temperature is quickly rising in Spain, as the crisis over Catalan independence is at a fever pitch. On Friday, the Spanish Senate is expected to authorize the central government to invoke Article 155 of Spain’s constitution and apply direct rule over Catalonia. This would allow Madrid to dismiss the Catalan government and take control of the regional police and radio and television stations. This drastic clause has never been invoked, and it remains unclear what steps the central government will take under Article 155. How will the Catalan parliament respond? On Thursday, the Catalan vice-president warned that if Madrid imposed direct rule, the Catalan government would have no choice but to declare independence. So far, the crisis has not affected the euro, and Caixabank, the third largest bank in the country, does not expect the Catalonia issue to affect Spain’s GDP, which the bank projects will expand 2.7 percent in 2018.

EUR/USD Fundamentals

Thursday (October 26)

• 2:00 German GfK Consumer Climate. Estimate 10.8. Actual 10.7
• 3:00 Spanish Unemployment Rate. Estimate 16.6%. Actual 16.4%
• 4:00 Eurozone M3 Money Supply. Estimate 5.0%. Actual 5.1%
• 4:00 Eurozone Private Loans. Estimate 2.8%. Actual 2.7%
• 7:45 ECB Minimum Bid Rate. Estimate 0.00%
• 8:30 ECB Press Conference
• 8:30 US Unemployment Claims. 235K
• 8:30 US Goods Trade Balance. Estimate -63.8B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%
• 10:00 US Pending Home Sales. Estimate 0.2%
• 10:30 US Natural Gas Storage. Estimate 61B

Friday (October 27)

• 8:30 US Advance GDP. Estimate 2.5%
• 10:00 US Revised UoM Consumer Sentiment. Estimate 100.7

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, October 26, 2017

EUR/USD Thursday, October 26 at 6:05 EDT

Open: 1.1813 High: 1.1837 Low: 1.1803 Close: 1.1811

EUR/USD Technical

EUR/USD inched higher in the Asian session but has retracted 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 is showing slight gains towards shorts positions in the Thursday session. Currently, short positions have a majority (63%), indicative of EUR/USD breaking out and moving to lower ground.

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.