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EUR/USD – Euro Hits 14 Month Highs on Draghi Remarks

The euro has posted gains for a third straight day, as the pair is up 0.32% in the Thursday session. In Germany, GfK Consumer Climate improved to 10.6, beating the estimate of 10.4. Later in the day, Germany releases Preliminary CPI, with an estimate of a flat 0.0%. In the US, Final GDP is expected to gain 1.2%, while unemployment claims are forecast to remain at 241 thousand. On Friday, Germany releases Retail Sales and the eurozone publishes CPI Flash Estimate. The US will publish UoM Consumer Sentiment.

The Draghi rally continues on Thursday, as the euro has punched past the 1.14 level for the first time since June 2016. The euro has jumped 1.9% this week, buoyed by hawkish comments by ECB President Mario Draghi at the ECB forum in Portugal. Draghi presented an optimistic view of the euro-area, saying that the recovery was broad and shrugged off weak inflation levels. Draghi said that the ECB’s stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. Draghi’s comments did not appear to be a major change from previous statements, but the markets thought otherwise, as speculation rose that the ECB was planning to tighten policy. After the euro jumped, the ECB beat a hasty retreat, as sources said that the markets had “misinterpreted” Draghi’s remarks. This impeded the euro’s rally, but only briefly. The ECB has consistently said that it would not reduce stimulus until inflation moves closer to the ECB’s target of 2%, but the message the markets appear to have heard is that the long war on inflation has been won, so it’s only a matter of time before the ECB wraps up its monetary stimulus. Unless Draghi does more to convince the markets that they have indeed overreacted, the euro rally could continue.

Investors are casting a nervous glance at Thursday, as the US releases Final GDP for the first quarter. The economy is expected to grow 1.2%, but there are worrying signs that the economy might miss this target. Recent economic data has been softer than expected, notably construction and manufacturing reports. US durable goods releases were weak in May. Core Durable Goods broke a streak of two straight declines, but the weak gain of 0.1% missed expectations. Durable Goods declined 1.1%, its sharpest decline since June 2016. The slowdown in orders of business equipment could weigh on second quarter growth. Last week, it was the turn of construction numbers to disappoint, as Housing Starts and Building Permits both missed expectations. Consumer spending has also been softer than expected, and if Final GDP falls short of the modest estimate of 1.2%, the dollar could respond with losses.

Dollar under pressure [1]

EUR/USD Fundamentals

Thursday (June 29)

Upcoming Key Events

Friday (June 30)

*All release times are EDT

*Key events are in bold

EUR/USD for Thursday, June 29, 2017

EUR/USD Thursday, June 29 at 6:15 EDT

Open: 1.1377 High: 1.1435 Low: 1.1375 Close: 1.1426

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1122 1.1242 1.1366 1.1465 1.1534 1.1534

EUR/USD has recorded slight gains in the Asian and European sessions

Further levels in both directions:

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Thursday session. Currently, short positions have a majority (73%), indicative of EUR/USD reversing directions and moving lower.

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 [5]

Market Analyst at OANDA [6]
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 Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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