EUR/USD – Euro Steady as Markets Await Fed Statement

EUR/USD is showing limited movement on Tuesday, as the pair trades at 1.1050 in the European session. The markets are keeping a close eye on the key event of the week, as the Federal Reserve issues its policy statement on Wednesday. Taking a look at Tuesday’s releases, there are no major Eurozone events on the schedule. In the US, we’ll get a look at two releases later on Tuesday which could shake up the sleepy euro – Core Durable Goods Orders and CB Consumer Confidence.

The euro finds itself just above the 1.10 level this week, after the continental currency was hammered by ECB head Mario Draghi and his colleagues. The ECB provided broad hints that it would take additional easing measures in December, and that was enough to spark a huge euro selloff. The euro lost over 300 points late last week, and briefly dipped below the symbolic 1.10 level. The ECB didn’t actually announce new easing measures and held the benchmark rate at 0.05%, but said that a rate cut in December was a possibility, and that a cut to deposit rates (currently at -0.2%) was also discussed. As for quantitative easing (QE), which has been the ECB’s “weapon of choice” to kick-start the Eurozone’s sluggish economy, ECB head Mario Draghi said the program would continue in 2016 or beyond if needed. Under the current QE program, the ECB is purchasing assets at the rate of EUR 60 billion/month. Any increase in QE levels would send interest rates lower and hence push down on the euro. This was underscored in March of this year, when the euro plunged to 10-year lows after the ECB introduced QE. The markets will now be on alert for further easing measures from the ECB, and any hints in this regard from Draghi or other ECB policymakers could send the euro tumbling yet again.

The US housing sector is sending mixed messages to the markets. Existing Housing Sales looked sharp last week, improving to 5.55 million, which was well above the estimate of 5.38 million. The news was much worse from New Home Sales on Monday, as the indicator slid to just 468 thousand, its lowest level in 10 months. The markets had expected a strong reading of 546 thousand. It promises to be a busy week, as the Federal Reserve issues a policy statement on Wednesday. Any hints about a rate hike could spark a dollar buying spree. Will the Fed finally provide some clarity about its monetary plans? Such transparency and lack of communication from the Fed has been lacking and has been a source of frustration for the markets, which continue to receive conflicting signals from Fed policymakers regarding the timing of a rate hike. On Thursday, the US releases a market-mover, Advance GDP for the fourth quarter. The markets are expecting a gain of 1.6%, compared to Final GDP in the third quarter of 3.9%.

EUR/USD Fundamentals

Tuesday (Oct. 27)

• 9:00 Eurozone M3 Money Supply. Estimate 5.0%. Actual 4.9%
• 9:00 Eurozone Private Loans. Estimate 1.1%. Actual 1.1%
• 12:30 US Core Durable Goods Orders. Estimate 0.0%
• 12:30 US Durable Goods Orders. Estimate -1.1%
• 13:00 US S&P/CS Composite-20 HPI. Estimate 5.1%
• 13:45 US Flash Services PMI. Estimate 55.3 points
• 14:00 US CB Consumer Confidence. Estimate 102.5 points
• 14:00 US Richmond Manufacturing Index. Estimate -3 points

Upcoming Events

Wednesday (Oct. 28)

• 18:00 FOMC Statement
• 18:00 Federal Funds Rate. Estimate <0.25%

*Key releases are highlighted in bold

*All release times are GMT

EUR/USD for Tuesday, October 27, 2015

EUR/USD October 27 at 10:20 GMT

EUR/USD 1.1047 H: 1.1072 L: 1.1036

EUR/USD Technical

• EUR/USD has shown little movement in the Asian and European sessions, continuing the trend we saw a day earlier.
• On the downside, 1.11017 remains under strong pressure. 1.0941 is stronger.
• 1.1105 is an immediate resistance line.
• Current range: 1.1017 to 1.1105

Further levels in both directions:

• Below: 1.1017, 1.0941 and 1.0847
• Above: 1.1105, 1.1214, 1.1296 and 1.1392

OANDA’s Open Positions Ratio

EUR/USD ratio has shown a slight move towards short positions since the European session on Monday, and long and short positions are almost an even split on Tuesday. This points to a lack of trader bias as to what direction the pair will take.

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.