EUR/USD – Euro Punches Past 1.24 After Mnuchin Comments, ECB Decision Next

The euro has ticked higher in the Thursday session. Currently, EUR/USD is trading at 1.2418, up 0.08% on the day. The euro is currently at its highest level since December 2014. On the release front, German indicators beat the forecasts. GfK Consumer Climate rose to 11.0, above the estimate of 10.8 points. As well, Ifo Business Climate improved to 117.6, beating the estimate of 117.1 points. Later in the day, the ECB will issue a monetary policy statement and is expected to maintain rates at a flat 0.00%. Over in the US, today’s key indicators are unemployment claims and New Home Sales. On Friday, the US releases Advance GDP for the fourth quarter of 2016, as well as durable goods reports.

With the eurozone economy in rebound mode, there is increasing talk of the ECB shifting to a normative monetary policy, after years of massive stimulus. Still, we’re unlikely to see any dramatics at the first policy meeting of 2018, as the ECB is likely to retain its pledge to continue buying bonds under its asset-purchase program (QE). The ECB has trimmed QE from EUR 60 billion to 3o billion/mth, and ECB policymakers have hinted that the Bank could wind up QE in September, and this has pushed the euro higher in recent weeks. ECB President Mario Draghi will speak after the statement, and any hints that QE will not be extended could send the euro to higher ground. However, Draghi may prefer to keep a low profile until the March policy meeting, when policymakers will have had a chance to review updated economic forecasts.

The US Senate confirmed Jerome Powell as the next head of the powerful Federal Reserve on Tuesday. The vote of 84-13 was a cakewalk, reflecting strong bipartisan support for Powell. The new chair is expected to continue Janet Yellen’s monetary stance, which was marked by small, incremental rate hikes during a period of economic expansion. The Fed has started to trim its massive balance sheet, another vote of confidence in the strength of the economy. At the same time, Fed policymakers are divided over how to approach inflation, which remains below the Fed target of 2.0%, despite a strong economy and a red-hot labor market. Another unknown is how the recent tax reform legislation will impact the US economy, and investors will be looking at the Fed as one source for guidance.

EUR/USD Fundamentals

Thursday (January 25)

  • 2:00 German GfK Consumer Climate. Estimate 10.8. Actual 11.0
  • 3:00 Spanish Employment Rate. Estimate 16.1%. Actual 16.6%
  • 4:00 German Ifo Business Climate. Estimate 117.1. Actual 117.6
  • 7:45 ECB Minimum Bid Rate. Estimate 0.00%
  • 8:30 ECB Press Conference
  • 8:30 US Unemployment Claims. Estimate 239K
  • 8:30 US Goods Trade Balance. Estimate -68.6B
  • 9:00 Belgian NBB Business Climate. Estimate 0.4
  • 10:00 US New Home Sales. Estimate 679K
  • 10:00 US CB Leading Index. Estimate 0.5%
  • 10:30 US Natural Gas Storage. Estimate -270B

Friday (January 26)

  • 8:30 US Advance GDP. Estimate 3.0%
  • 8:30 US Core Durable Goods Orders. Estimate 0.5%
  • 8:30 US Advance GDP Price Index. Estimate 2.3%
  • 8:30 US Durable Goods Orders. Estimate 0.9%

*All release times are GMT

*Key events are in bold

EUR/USD for January 25, 2018

EUR/USD for January 25 at 6:10 EDT

Open: 1.2408 High: 1.2460 Low: 1.2385 Close: 1.2418

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2200 1.2286 1.2357 1.2481 1.2569 1.2677

EUR/USD posted gains in the Asian session but has given up most of these gains in European trade

  • 1.2357 is providing support
  • 1.2481 is the next line of resistance

Further levels in both directions:

  • Below: 1.2357, 1.2286, 1.2200 and 1.1961
  • Above: 1.2481, 1.2569 and 1.2677
  • Current range: 1.2357 to 1.2481

OANDA’s Open Positions Ratio

EUR/USD ratio has shown little movement this week. Currently, short positions have a majority (62%), indicative of EUR/USD reversing directions and heading to lower ground.

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.