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EUR/USD – Euro Drifting Continues, German Consumer Economic Sentiment Beats Expectations

EUR/USD continues to have an uneventful week, as the pair trades slightly below the 1.09 line in the European session. On the release front, it’s a busy day in the Eurozone. German ZEW Economic Sentiment beat expectations, while Eurozone CPI posted a weak gain of 0.2%, matching the forecast. There are no major US releases on Tuesday. We’ll get a look at key US numbers on Wednesday, with the release of CPI and Building Permits.

The euro has managed to hold its own against the US dollar, bolstered by some positive Eurozone readings. Recent releases have pointed to stronger growth in the bloc, especially in Germany, the largest economy in Europe. German ZEW Economic Sentiment softened in December, but still beat the estimate. However, Eurozone ZEW Economic Sentiment missed expectations. European inflation levels remain weak, as underscored by Eurozone CPI, which remained unchanged at 0.2%. Meanwhile, the minutes from the December ECB policy meeting indicated that some policymakers want to see further cuts to deposit rates as well as an increase in the current QE program of EUR 60 billion/mth. The markets will be keeping a close eye on the upcoming ECB policy meeting on Thursday, and if Mario Draghi & Co. implement further monetary easing, we can expect the euro to lose ground.

The Federal Reserve raised interest rates in December for the first time in nine years, and hinted that this move was the first of a series in 2016. Not surprisingly, this has led to intense market speculation as to the timing of another rate hike. A rate hike from the Fed at next week’s policy meeting is not considered likely, coming so soon after the December move. A hike by the Fed in March is more probable, contingent, however, on a strong US economy. Although the economy is in good shape, one major area of concern is the inflation picture. Inflation levels have not kept up with other economic indicators and remain at low levels. The minutes of the December meeting indicated that some Fed members strongly considered voting against a rate hike due to weak inflation. Another concern is a lack of wage growth, despite a robust labor market. The Fed will be keeping a close eye on inflation and wage growth data before opting to press the rate trigger for the first time in 2016.

EUR/USD Fundamentals

Tuesday (Jan. 19)

Upcoming Key Events

Wednesday (Jan. 20)

*Key events are in bold

*All release times are EST

EUR/USD for Tuesday, January 19, 2016

EUR/USD January 19 at 5:30 EST

Open: 1.0892 Low: 1.0859 High: 1.0905 Close: 1.0885

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1087 1.1172

Further levels in both directions:

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged, reflective of the lack of movement from the pair. Short positions command a strong majority (55%), indicative of trader bias towards the euro moving downwards.

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.

Kenny Fisher

Kenny Fisher [4]

Market Analyst at OANDA [5]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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