EUR/USD – Euro Steady as Cautious Markets Awaits Fed

EUR/USD has shown some downward pressure, but remains unchanged in the Wednesday session. Currently, the pair is trading at 1.1150. On the release front, the spotlight is squarely on the US Federal Reserve. The FOMC will publish a rate statement and economic projections, followed by a press conference hosted by Fed chair Janet Yellen. The only other US  release today is Crude Oil Inventories, with the markets expecting a strong surplus of 3.2 million. There are no Eurozone releases on the schedule. On Thursday, ECB head Mario Draghi will speak at an event in Frankfurt, while the US releases Unemployment Claims.

The FOMC will release a highly-anticipated rate statement later on Wednesday. The Fed is widely expected to maintain the benchmark interest rate at 0.25% but the rate statement and follow-up press conference could shed some light on the likelihood of a December rate, which currently is priced in at 48% (the odds of a September hike are just 15%). The ECB will be keeping a close eye on the Fed releases, as the Fed’s monetary policy has significant implications for the ECB’s asset-purchase program, which is scheduled to run until March 2017. If the Fed hints at a December rate hike, global yields could rise, which would be good news for the ECB’s asset-purchase scheme.

Most investment strategists and economists are anticipating that the Fed will hold the benchmark interest rate unchanged, opting instead to tweak the Federal Open Market Committee (FOMC) statement and use the dot plot to signal a December rate hike. Fed Chair Yellen is expected to drive the message further during her press conference. Back in August, Yellen spoke in very positive terms about the US economy, and this raised hopes that the Fed might raise rates in September. However, these expectations were largely dashed after the US posted disappointing GDP and employment reports. Recent comments from FOMC members, which have been almost contradictory at times, have left the markets confused and reinforced the perception that the Fed remains divided regarding its near-future monetary policy. A clear and decisive message from Yellen could go a long way in improving market sentiment. If the Fed provides some clues about a December move, the US dollar could move higher. Even if the Fed does go ahead with a December hike, it will prove to be a token raise, coming a year after the last rate hike. In December 2015, the Fed hinted that it expected to implement a series of rate hikes in 2016, but to the market’s chagrin, this never materialized.

EUR/USD Fundamentals

Wednesday (September 21)

• 14:30 US Crude Inventories. Estimate 3.2M
• 18:00 FOMC Economic Projections
• 18:00 FOMC Federal Funds Rate. Estimate <0.50%
• 18:30 FOMC Press Conference

Thursday (September 22)

• 12:30 US Unemployment Claims. Estimate 261K
• 13:00 ECB President Mario Draghi Speaks

*All release times are EDT

* Key events are in bold

EUR/USD for Wednesday, September 21, 2016

EUR/USD September 21 at 10:15 GMT

Open: 1.1152 High: 1.1159 Low: 1.1122 Close: 1.1151

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair posted slight losses in European trade but has since recovered
• 1.1278 is a strong resistance line
• 1.1150 is fluid and could break during the Wednesday session

Further levels in both directions:

• Below: 1.1150, 1.1054, 1.0957 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 slight movement towards long positions. Currently, long and short positions are almost an even split, indicative of a lack of trader bias as to what direction EUR/USD will take next.

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.