EUR/USD – Euro Slightly Higher As Fed, ECB Sound Cautious Tone

EUR/USD continues to post modest gains on Friday, and the pair trades above the 1.13 line in the European session. The Federal Reserve released its minutes on Thursday, which indicated that policymakers were hesitant to raise rates due to concerns that the global slowdown could affect the US economy. In other economic news, US unemployment claims were well below expectations. Later in the day, we’ll hear from two Fed FOMC members, Dennis Lockhart and Charles Evans. Over in Europe, the ECB policy meeting summary said that the central bank planned to continue its accommodative monetary policy. Eurozone manufacturing numbers were mixed on Friday. French Industrial Production shot up 1.6% in August, its first gain since January. Italian Industrial Production came in at -0.5%, short of the estimate.

The Federal Reserve released the minutes of its most recent policy meeting on Thursday. The minutes indicated that the Fed does not feel that the timing is appropriate for a rate hike, but provided few clues as to when the Fed might take action. Policymakers cited concerns that the sluggish global economy could affect the US economy. Last week’s dismal Nonfarm Payrolls may have been a factor in the Fed’s dovish statement, and the likelihood has risen that the Fed will not take action before 2016. Still, if the US rebounds with some strong numbers, speculation about an imminent rate hike could rise, and the dollar could benefit and move higher against its rivals.

Meanwhile, the ECB summary was cautious in tone, sounding much like the Fed minutes. The Eurozone is stuck with low growth and weak inflation, but the summary indicated that there are no plans to expand the current stimulus program, at least for now. It’s been a tough week for Germany, the Eurozone’s largest economy. First, Factory Orders posted a decline of 1.8%, its worst showing in eight months. This was followed by Industrial Production, which recorded a decline of 1.2%. Thursday brought more bad news, as the German trade surplus contracted to EUR 19.6 billion in August, compared to EUR 22.8 billion a month earlier. This was short of the estimate of EUR 20.2 billion. These weak numbers underscore growing concern that the global slowdown is affecting Germany, and investors are nervous that a contraction in the German economy could quickly affect the rest of the bloc and send the fragile Eurozone economy into a tailspin.

EUR/USD Fundamentals

Friday (Oct. 9)

• 6:45 French Government Budget Balance. Actual EUR -89.7 billion.
• 6:45 French Industrial Production. Estimate 0.6%. Actual 1.6%.
• 8:00 Italian Industrial Production. Estimate -0.3%. Actual -0.5%.
• 12:30 US Import Prices. Estimate -0.5%.
• 13:10 Fed FOMC Member Denis Lockhart Speaks.
• 14:00 US Wholesale Inventories. Estimate 0.1%.
• 17:30 Fed FOMC Member Charles Evans Speaks.

The markets will be listening closely to remarks from the FOMC members, which come on the heels of the Federal Reserve’s minutes. Any hints about a rate hike could bolster the US dollar.

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Friday, October 9, 2015

EUR/USD October 9 at 9:15 GMT

EUR/USD 1.1327 H: 1.1347 L: 1.1267

EUR/USD Technical

• EUR/USD was static in the Asian session and has posted modest gains in European trading.
• 1.1296 has been active and is a weak support line.
• 1.1392 is a strong resistance line.
• Current range: 1.1296 to 1.1392

Further levels in both directions:

• Below: 1.1296, 1.1214, 1.1105, 1.1017 and 1.0928
• Above: 1.1392, 1.1470, 1.1658 and 1.1712

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight movement towards long positions on Friday, but short positions still command a majority of the positions (59%). This points to trader sentiment in favor of the euro reversing directions and losing ground against the dollar.

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.