EUR/USD – Euro Ticks Upwards, German Business Climate Climbs

EUR/USD has edged higher in the Tuesday session, as the pair trades slightly below the 1.09 level. On the release front, German Ifo Business Climate climbed to 110.5 points, easily beating the estimate of 109.6 points. Later in the day, ECB president Mario Draghi will discuss monetary policy at a conference in Berlin. In the US, today’s highlight is CB Consumer Confidence, with the indicator expected to drop to 101.5 points. On Wednesday, the US releases New Home Sales.

Despite a weak Eurozone economy and growing fears about fallout from the UK’s decision to leave the European Union, business sentiment continues to improve. German Ifo Business Climate rose to 110.5 in October, improving for a second straight month. Earlier in the month, the well-respected ZEW economic sentiment surveys for Germany and the Eurozone also pointed upwards. Still, these positive releases have failed to boost the euro, which has dropped below the 1.09 line, as EUR/USD trades at its lowest levels since March. October has not been kind to the euro, which has lost 3.0 percent of its value against the greenback.

The euro dropped 100 points late last week, courtesy of Mario Draghi’s dovish remarks following Thursday’s rate announcement. There were no surprises from the ECB, as the bank made no changes to interest rates or the bank’s asset-purchase program (QE). The ECB held rates at 0.00%, where they have been pegged since March. The QE scheme remained unchanged at EUR 80 billion/mth. There was some speculation that Draghi would make an announcement about the time-frame of the QE program, which will terminate at the end of March 2017 “or beyond, if necessary”, in the words of the ECB. Draghi will likely make a decision on whether to extend QE following the release of the bank’s updated quarterly forecasts in December.

Last week’s US unemployment claims surprised the markets by climbing to 260 thousand on Thursday, higher than expected. This marked the first reading since August that the key indicator has not beat estimates. Still, the dollar didn’t lose any ground, as the 4-week daily average of jobless claims remains excellent. There was good news from the manufacturing front, as the Philly Fed Manufacturing Index posted a strong gain of 9.7 points, easily beating the forecast of 5.2 points. On the inflation front, US numbers were a mixed bag last week. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December. Currently, a December rate hike is currently priced in at 68 percent, as market sentiment remains high that the Fed will press the rate trigger before the end of the year.

EUR/USD Fundamentals

Tuesday (October 25)

• 8:00 – German Ifo Business Climate. Estimate 109.6. Actual 110.5
• 13:00 US HPI. Estimate 0.5%
• 14:00 US S&P/CS Composite-20 HPI. Estimate 5.1%
• 14:00 US CB Consumer Confidence. Estimate 101.5
• 14:00 IBF/TIPP Economic Optimism. Estimate 47.6
• 14:00 US Richmond Manufacturing Index. Estimate -5 points
• 15:30 ECB President Mario Draghi Speaks

Wednesday (October 26)

• 14:00 US New Home Sales. Estimate 601K

*All release times are EDT

* Key events are in bold

EUR/USD for Tuesday, October 25, 2016

EUR/USD October 25 at 9:30 GMT

Open: 1.0873 High: 1.0893 Low: 1.0868 Close: 1.0886

EUR/USD Technical

• EUR/USD was flat in the Asian session. The pair has posted small gains in European trade
• 1.0821 is providing support
• There is resistance at 1.0957

Further levels in both directions:

• Below: 1.0821, 1.0708 and 1.0616
• Above: 1.0957, 1.1054, 1.1150 and 1.1278
• Current range: 1.0821 to 1.0957

OANDA’s Open Positions Ratio

EUR/USD ratio is showing long positions with a strong majority (63%), indicative of trader bias towards EUR/USD continuing to gain ground.

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.