The euro has posted losses on Tuesday, continuing the downward trend which marked the Monday session. Currently, EUR/USD is trading at 1.1803, down 0.33% on the day. On the release front, the sole eurozone event, German Import Prices, came in at 0.0%, shy of the forecast of 0.1%. Still, the reading ended a streak of five straight declines. In the US, today’s key indicators are CB Consumer Confidence and New Home Sales. Later in the day, Fed Chair Janet Yellen will speak at an event in Cleveland. On Wednesday, the US will release Core Durable Goods Orders and Pending Home Sales.
Angela Merkel easily won the German election on Sunday, but her win has been described as a “nightmare victory”. This sentiment has pushed the euro downwards, as EUR/USD is currently trading at its lowest level since August 25. Merkel’s CDU won 33 percent of the vote and will be the largest party in parliament, but arduous negotiations await as Merkel will have to cobble together a coalition in order to form a government. The center-left SFD, which won 20 percent of the vote, announced that it will not join the CDU, so Merkel will have to negotiate with smaller parties. The far-right AFD ran on a far-right, anti-immigrant platform, and the party’s surge in support has sent shock waves in Germany and across Europe. The AFD can be ruled out as a coalition partner, which leaves the Greens and the pro-business FDP party as the most likely configuration. However, the FDP has insisted on the powerful finance portfolio and will likely try to reduce German transfer payments to the European Union. These views run counter to Merkel’s vision of taking steps to more closely integrate the European Union, particularly as Britain is on its way out of the club.
Federal Reserve policymakers have been divided over a rate hike in December, which would mark a third rate increase in 2017. With no clear message from the Fed, the markets really don’t know what to expect, and fed futures have priced in a December hike at 55%. On Monday, New York Fed President William Dudley made a strong case to raise rates. Dudley cited a soft US dollar and strong global growth as reasons why inflation would increase and also translate into stronger wage growth. Dudley said he expects inflation to reach the Fed’s target of 2 percent in the “medium term”, and predicted that the Fed would continue to gradually remove monetary accommodation. In last week’s rate statement, the Fed announced that it would reduce its $4.2 trillion balance sheet by $50 billion/mth, starting in October. Commenting on the decision to taper the balance sheet, FOMC member John Williams said on Friday that he did not “anticipate any sudden or large effects on rates or spreads”, but acknowledged that the Fed could not predict how the markets would react, and policymakers would have to monitor market reaction to the reduction in the balance sheet.
Tuesday (September 26)
- 2:00 German Import Prices. Estimate 0.1%. Actual 0.0%
- 9:00 US S&P/CS Composite-20 HPI. Estimate 5.7%
- 10:00 US CB Consumer Confidence. Estimate 119.6
- 10:00 US New Home Sales. Estimate 585K
- 10:00 US Richmond Manufacturing Index. Estimate 13
- 10:30 US FOMC Member Lael Brainard Speaks
- 12:45 Federal Reserve Chair Janet Yellen Speaks
Wednesday (September 27)
- 8:30 US Core Durable Goods Orders. Estimate 0.2%
- 10:00 US Pending Home Sales. Estimate -0.5%
*All release times are GMT
*Key events are in bold
EUR/USD for Tuesday, September 26, 2017
EUR/USD Tuesday, September 26 at 6:15 EDT
Open: 1.1850 High: 1.1862 Low: 1.1798 Close: 1.1803
EUR/USD showed little movement in the Asian session and has posted slight gains in European trade
- 1.1712 is a support line
- 1.1876 is the next resistance line
Further levels in both directions:
- Below: 1.1712, 1.1611 and 1.1489
- Above: 1.1876, 1.1996, 1.2018 and 1.2108
- Current range: 1.1712 to 1.1876
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged in the Tuesday session. Currently, short positions have a majority (66%), indicative of EUR/USD continuing to move lower.
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