EUR/USD – Euro Edges Higher as German CPI Improves

The euro has posted slight gains in the Thursday session. Currently, EUR/USD is trading at 1.1430. On the release front, German Final CPI posted a gain of 0.2%, matching the forecast. Later in the day, the US releases PPI, which is expected to remain at 0.0%. We’ll also get a look at Unemployment Claims, with an estimate of 245 thousand. Fed Chair Janet Yellen will testify before the Senate Banking Committee. On Friday, the US releases CPI and retail sales numbers, so traders should be prepared for some movement from EUR/USD.

Germany may be the locomotive of the eurozone economy, but the bloc’s largest economy has not been immune to low inflation. Final CPI improved to 0.2% in June, compared to -0.2% in May. CPI has managed just one reading above 0.2% in 2017, and earlier in the week, WPI came in at 0.0%. German and eurozone inflation levels remain well below the ECB’s target of 2%, and with no indication that inflation levels will move higher anytime soon, the cautious ECB is unlikely to taper its aggressive stimulus package.

Janet Yellen played it safe in front of a congressional committee, as her message to the markets didn’t contain any surprises. Yellen reiterated that the Fed planned to raise rates “gradually”, and added that the Fed would begin trimming its balance sheet before the end of the year. The Fed chair was careful not to provide any timelines, but many analysts are circling September for a balance sheet reduction, with a rate hike to follow in December. However, despite Yellen’s assurances, the markets remain lukewarm about a rate hike before the end of the year, given a slower US economy and stubbornly low inflation. The CME Group has pegged a December rate increase at just 47%, while other forecasts are pointing to odds as low as 40%. Hints from the Fed will not suffice to bring investors on board – unless growth and inflation numbers move higher, the markets are likely to remain lukewarm about the likelihood of a third rate hike in 2017.

After a short hiatus, Washington is again abuzz over allegations of secret ties between Russia and the Trump administration during the US election. This week’s breaking news is the revelation that Donald Trump Jr. admitted that a Russian official contacted him and offered to provide him with evidence incriminating Hillary Clinton. Trump and the White House are trying to lower the flames and put a positive spin on the meeting, but the media and lawmakers (including Republicans) aren’t about to let Trump off the hook. The crisis is just the latest miscue for the Trump administration, which hasn’t been able to pass any significant laws through Congress, even though Republicans control both the House of Representatives and the Senate. The latest dark cloud over the White House has dampened investor confidence, and the euro took advantage on Tuesday, climbing close to the 1.15 line.

EUR/USD Fundamentals

Thursday (July 13)

• 2:00 German Final CPI. Estimate 0.2%. Actual 0.2%
• 2:45 French Final CPI. Estimate 0.0%. Actual 0.0%
• 8:30 US PPI. Estimate 0.0%
• 8:30 US Unemployment Claims. Estimate 245K
• 8:30 US Core PPI. Estimate 0.2%
• 10:00 US Federal Chair Janet Yellen Testifies
• 10:30 US Natural Gas Storage. Estimate 59B
• 11:30 US FOMC Member Charles Evans Speaks
• 13:00 US FOMC Member Lael Brainard Speaks
• 13:01 US 30-y Bond Auction
• 14:00 US Federal Budget Balance. Estimate -36.2B

Upcoming Key Events

Friday (July 14)

• 8:30 US CPI. Estimate 0.1%
• 8:30 US Core CPI. Estimate 0.2%
• 8:30 US Core Retail Sales. Estimate 0.2%
• 8:30 US Retail Sales. Estimate 0.1%
• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.1

*All release times are EDT

*Key events are in bold

EUR/USD for Thursday, July 13, 2017

EUR/USD Thursday, July 13 at 3:15 EDT

Open: 1.1418 High: 1.1456 Low: 1.1416 Close: 1.1428

EUR/USD Technical

EUR/USD has posted small gains in the Asian session but has retracted in the European session

• 1.1366 is providing support
• 1.1465 is the next line of resistance. It is a weak line

Further levels in both directions:

• Below: 1.1366, 1.1242, 1.1122 and 1.0985
• Above: 1.1465, 1.1534 and 1.1616
• Current range: 1.1366 to 1.1465

OANDA’s Open Positions Ratio

EUR/USD ratio is showing gains in long positions. Currently, short positions have a majority (65%), indicative of EUR/USD reversing directions and moving lower.

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