EUR/USD – Euro Rises Ahead of German Economic Sentiment

The euro has posted strong gains on Tuesday, as EUR/USD trades at 1.1260. It’s a busy day on the release front. Germany and the Eurozone will release the ZEW Economic Sentiment reports. Over in the US will release Building Permits and consumer inflation reports. On Wednesday, the FOMC will publish the minutes of its July policy meeting.

The markets are keeping a close eye on German ZEW Economic Sentiment, a key indicator which should be treated as a market-mover. The indicator plunged in July by 6.8 points, reflecting market turmoil after the surprise Brexit vote in late June. Better news is expected in the August release, with an estimate of 2.1 points. However, Eurozone ZEW Economic Sentiment is expected to show a second straight decline, with a forecast of 6.3 points. Meanwhile, Germany’s economy expanded 0.4% in the second quarter, within expectations. However, this figure was considerably weaker than the 0.7% gain in the first quarter. As the largest economy in the Eurozone, German numbers are often a bellwether for the Eurozone. With the after-effects of the Brexit vote just beginning to be measured, third quarter numbers, including Eurozone GDPs, could drop considerably.

US numbers wrapped up the week on a sour note, led by soft retail sales reports. Core Retail Sales dropped 0.3%, while Retail Sales slipped to a flat 0.0%. There was no relief from PPI readings, which measure wholesale prices. PPI came in at -0.4% and Core PPI declined 0.3%. All four releases missed expectations and were lower than their previous readings. UoM Consumer Sentiment improved to 90.4 points, but this fell short of expectations. The soft PPI readings point to ongoing low inflation levels, well below the Federal Reserve’s target of about 2.0%. The Fed next meets in September to decide whether to raise interest rates. A soft GDP report last month had dampened expectations about a rate hike before 2017, but sharp employment numbers, led by a stellar NFP report, raised the odds of a September hike. However, Friday’s soft numbers have again dampened enthusiasm about a rate hike in September, and in all likelihood, the Fed will stay on the sidelines until December or even later.

EUR/USD Fundamentals

Tuesday (August 16)

  • 9:00 German ZEW Economic Sentiment. Estimate 2.1
  • 9:00 Eurozone ZEW Economic Sentiment. Estimate -6.3
  • 9:00 Eurozone Trade Balance. Estimate 23.2B
  • 12:30 US Building Permits. Estimate 1.16M
  • 12:30 US CPI. Estimate 0.0%
  • 12:30 US Core CPI. Estimate 0.2%
  • 12:30 US Housing Starts. Estimate 1.18M
  • 13:15 US Capacity Utilization Rate. Estimate 75.7%
  • 13:15 US Industrial Production. Estimate 0.2%
  • 14:30 US Crude Oil Inventories
  • 17:00 US FOMC Member James Bullard Speaks

Wednesday (August 17)

  • 18:00 US FOMC Meeting Minutes

* Key releases are in bold

*All release times are GMT

EUR/USD for Tuesday, August 16, 2016

EUR/USD August 16 at 8:20 GMT

Open: 1.1181 High: 1.1264 Low: 1.1176 Close: 1.1262

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0925 1.1054 1.1150 1.1278 1.1376 1.1467
  • EUR/USD posted small gains in the Asian session and has recorded strong gains in the European session
  •  1.1278 is a strong resistance line
  •  1.1150 is a weak support line and could be tested in the Tuesday session

Further levels in both directions:

  • Below: 1.1150, 1.1054, 1.0925 and 1.0821
  • Above: 1.1278, 1.1376 and 1.1467
  • Current range: 1.1150 to 1.1278

OANDA’s Open Positions Ratio

EUR/USD ratio has shown gains in long positions. Currently, short positions have a strong majority (60%), indicative of trader bias towards EUR/USD reversing directions and moving to lower levels.

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

Market Analyst at OANDA
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, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.