EUR/USD is showing limited movement in the Friday session. Currently, the pair is trading at 1.0580. On the release front, there are no eurozone events. In the US, the markets are forecasting mixed news from today’s key indicators. New Home Sales is expected to jump to 575 thousand, but UoM Consumer Sentiment is forecast to dip to 96.1 points.
The euro has been under pressure this week. On Wednesday, EUR/USD dropped below the 1.05 level, which last occurred on January 11. It’s been a rough February for the continental currency, which has dropped 2.0% in value, wiping out much of January’s gains. Will the euro get any support from the European Central Bank? That remains unlikely, as the ECB recently extended its asset-purchase program until December 2017. Although the eurozone is enjoying a moderate spurt in growth and higher inflation, the central bank appears in no rush to tighten monetary policy, which would be bullish for the euro. Analysts note that the ECB does not wish to make any dramatic moves close to crucial elections in Europe (France goes to the polls in April, followed by Germany in September). At the same time, “political risk” in Europe is affecting investor confidence and weighing on the euro. In June, Britain stunned the continent by voting to leave the European Union, throwing British-EU relations into crisis mode. In France, Marine Le Pen, leader of the far-right National Front, is the front-runner in the first round and could conceivably be elected president. Le Pen wants to take France out of the eurozone and has promised a referendum on French membership in the EU. Germany’s Angela Merkel, a pillar of stability on the continent, is in a tough election fight and voters may choose change rather than hand her a fourth term in office. ECB President Mario Draghi will likely be reluctant to make any major moves which could entangle the ECB in the hotly contested elections in France and Germany.
Market response to the Federal Reserve’s minutes has been muted. There were no surprises in the January meeting, which were slightly dovish in tone. The key statement in the minutes was that a rate hike “fairly soon” could be appropriate in order to head off an overheated economy. The minutes indicated that Fed policymakers remain confident that the central bank will raise rates gradually, given the strong performance of the US economy. At the same time, the minutes noted uncertainty about President Trump’s fiscal stimulus plan but little concern over the risk of inflation. So the million dollar question of when the Fed will press the rate trigger remains unanswered. Although pressure is slowly building towards a move by the Fed, there does not appear a sense of urgency to raise rates at the next meeting in March. According to the CME Group, the odds of a March hike are only at 17%, while the likelihood of a hike in either May or June stands above 40%.
Friday (February 24)
- 10:00 US New Home Sales. Estimate 575K
- 10:00 US Revised UoM Consumer Sentiment. Estimate 96.1
- 10:00 US Revised UoM Inflation Expectations
*All release times are EST
*Key events are in bold
EUR/USD for Friday, February 24, 2017
EUR/USD February 24 at 4:25 EST
Open: 1.0584 High: 1.0604 Low: 1.0569 Close: 1.0584
EUR/USD ticked higher in the Asian session but has retracted in European trade
- 1.0506 is providing support
- 1.0616 is a weak resistance line
Further levels in both directions:
- Below: 1.0506, 1.0414 and 1.0333
- Above: 1.0616, 1.0708, 1.0873 and 1.0985
- Current range: 1.0506 to 1.0616
OANDA’s Open Positions Ratio
EUR/USD ratio is showing slight movement towards short positions. Currently, long positions have a majority (58%), indicative of trader bias towards the euro continuing to move higher.