EUR/USD – Euro Steady as Eurozone Final CPI Matches Forecast

The euro has posted losses in the Wednesday session. Currently, EUR/USD is trading at 1.2234, down 0.18% on the day. In economic news, Eurozone Final CPI ticked lower to 1.4%, matching expectations. In the US, there are no key events on the schedule. On Thursday, Bundesbank President Jens Weidmann will speak at an event hosted by the Bundesbank and the IMF. It’s a busy day in the US, with the release of construction, manufacturing and employment reports.

The euro continues to enjoy a sunny January. The continental currency has gained 2.4% this month, and this week, the EUR/USD touched highs not seen since December 2014. Investors flocked to the euro following the ECB minutes, which has raised speculation that the ECB could wind up its asset purchase program (QE) in September 2018. As well, substantial progress in German coalition talks has also boosted sentiment towards the euro. Talk of the ECB reducing stimulus in September, and perhaps raising interest rates afterwards have boosted the euro. However, on Tuesday, Bundesbank President Jens Weidmann said in a newspaper interview that he did not expect interest rates to rise until mid-2019, even if QE ends in late 2018. If Weidmann reiterates this stance on Thursday, investors may take note and the euro could backtrack on some of its recent gains.

Investors are keeping an eye on the Federal Reserve, which holds its next policy meeting on January 31. A rate hike is a virtual certainty, with CME Fed Watch pegging the odds of a quarter-point hike at 98.5%. Although this means that a rate hike has been priced in by the markets, the dollar could nevertheless gain ground after a hike, as a rate increase would signify an important vote of confidence in the economy by the Fed Reserve. If the US economy continues to expand at a c clip of around 3 percent, there is a strong likelihood of another rate hike in the first half of 2018.

EUR/USD Fundamentals

Wednesday (January 17)

• 5:00 Eurozone Final CPI. Estimate 1.4%. Actual 1.4%
• 5:00 Eurozone Final Core CPI. Estimate 0.9%. Actual 0.9%
• Tentative – German 30-year Bond Auction
• 9:15 US Capacity Utilization Rate. Estimate 77.3%
• 9:15 US Industrial Production. Estimate 0.3%
• 10:00 US NAHB Housing Market Index. Estimate 73
• 14:00 US Beige Book
• 16:00 US TIC Long-Term Purchases. Estimate 50.1B
• 16:30 US FOMC Loretta Mester Speaks

Thursday (January 18)

• 3:30 German Buba President Jens Weidmann Speaks
• 8:30 US Building Permits. Estimate 1.29M
• 8:30 US Housing Starts. Estimate 1.28M
• 8:30 US Philly Fed Manufacturing Index. Estimate 24.9
• 8:30 US Unemployment Claims. Estimate 250K

*All release times are GMT

*Key events are in bold

EUR/USD for January, January 17, 2018

EUR/USD for January 17 at 4:40 EDT

Open: 1.2261 High: 1.2324 Low: 1.2208 Close: 1.2236

EUR/USD Technical

In the Asian session, EUR/USD posted small gains but then reversed directions and headed lower. The pair has ticked  lower in European trade

• 1.2200 is providing support. This  line is under pressure
• 1.2286 has some breathing room in resistance line

Further levels in both directions:

• Below: 1.2200, 1.1961, 1.1876 and 1.1777
• Above: 1.2286, 1.2357 and 1.2481
• Current range: 1.2200 to 1.2286

OANDA’s Open Positions Ratio

EUR/USD ratio continues to show little movement this week. Currently, short positions have a majority (64%), indicative of EUR/USD continuing to move to lower ground.

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