EUR/USD – Euro Slightly Higher as Eurozone CPI Beats Estimate

EUR/USD is showing limited movement in the Thursday session. Currently, the pair is trading at 1.0730. On the release front, Eurozone Final CPI posted a gain of 0.5%, edging above the forecast of 0.4%. As well, the ECB will release the minutes of its October policy meeting. In the US, the day is packed with major events, highlighted by CPI and unemployment claims. Fed chair Janet Yellen will testify about the economy before the Congressional Joint Economic Committee.

Eurozone inflation and confidence indicators have looked sharp this week. In October, Final CPI gained 0.5%, up from 0.4% a month earlier. This marked its strongest gain since June 2014. Economic sentiment continues to improve, according to ZEW (Center of European Economic Research) surveys in the Eurozone and Germany. The surveys provide a snapshot of the mood of institutional investors and analysts. The German report showed a sharp gain of 13.8 points, well above the forecast of 7.9 points. The Eurozone release improved to 15.8, above the estimate of 7.9. Both indicators posted 4-month highs, pointing to strong optimism over economic growth on the continent. However, the head of the ZEW, Achim Wambach, sounded a note of caution, saying that confidence has decreased since the Trump election victory. Wambach said that Trump’s economic plans are “thin and show no policy rationale” and added that the election has ushered in a period of uncertainty. This could spell bad news for the euro, which has dropped 3.4 percent since November 7.

Donald Trump’s election victory was a huge upset which caused turmoil across global markets. The shock has started to subside, and market sentiment is currently very favorable towards the dollar, which is on a roll against the euro. A Trump presidency, bolstered by a Republican-controlled Congress) could signal a looser fiscal policy and significant tax cuts. If this scenario materializes, inflation would likely climb, leading to higher interest rates and hence a stronger dollar. At the same time, Trump remains an enigma – aside from being “pro-business”, his political and economic agendas are unclear. This lack of certainty means the markets could be in for plenty of surprises with Trump in office, which could translate into volatility in the currency markets.

With the Federal Reserve meeting for a policy meeting in December, expectations are sky-high that the Fed will press the trigger and raise rates by a quarter-point for the first time in a year. There have been several false starts before, but this time should be different. The Fed has sent out strong signals that it will raise rates, and in the past two rate decisions, some FOMC members voted for an immediate rate hike. The odds of a rate rise currently stand at a remarkable 90 percent, so barring some sharp negative data out of the US, we’ll see a rate hike before the end of 2016.

Fed Hike Odds Near 100%

EUR/USD Fundamentals

Thursday (November 17)

  • 9:00 Italian Trade Balance. Estimate 2.85B. Actual 3.67B
  • 9:48 Spanish 10-year Bond Auction. Actual 1.50%
  • 10:00 Eurozone Final CPI. Estimate 0.4%. Actual 0.5%
  • 10;00 Eurozone Final Core CPI. Estimate 0.8%. Actual 0.8%
  • 12:30 ECB Monetary Policy Meeting Accounts
  • 13:30 US Building Permits. Estimate 1.19M
  • 13:30 US CPI. Estimate 0.4%
  • 13:30 US Core CPI. Estimate 0.2%
  • 13:30 US Philly Fed Manufacturing Index. Estimate 8.1 points
  • 13:30 US Unemployment Claims. Estimate 257K
  • 13:30 US Housing Starts. Estimate 1.16M
  • 13:50 US FOMC Member William Dudley Speech
  • 15:00 US Fed Chair Janet Yellen Testifies
  • 15:30 US Natural Gas Storage. Estimate 34B
  • 17:30 US FOMC Member Lael Brainard Speech

*All release times are GMT

* Key events are in bold

EUR/USD for Thursday, November 17, 2016

EUR/USD November 17 at 10:50 GMT

Open: 1.0706 High: 1.0736 Low: 1.0682 Close: 1.0730

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0506 1.0616 1.0708 1.0821 1.0957 1.1054
  • EUR/USD was flat in the Asian session and has posted slight gains in European trade
  • 1.0708 has switched to support following gains by EUR/USD
  • There is resistance at 1.0821

Further levels in both directions:

  • Below: 1.0708, 1.0616 and 1.0506
  • Above: 1.0821, 1.0957, 1.1054 and 1.1150
  • Current range: 1.0708 to 1.0821

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Thursday session. Currently, short positions have a majority (63%), indicative of trader bias towards EUR/USD reversing directions and moving to lower 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.

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.
Kenny Fisher

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