EUR/USD – Euro Quiet Ahead of German CPI, Powell Testimony

The euro is showing limited movement in the Tuesday session. Currently, EUR/USD is trading at 1.2330, up 0.10% on the day. On the release front, German Preliminary CPI is expected to rebound with a gain of 0.5%. In the US, the markets are braced for weak data from durable goods. Core Durable Goods Orders are forecast to dip to 0.4%, and Durable Goods Orders are expected to decline 2.4%. Another key release is CB Consumer Confidence, which is expected to climb to 126.2 points. As well, Jerome Powell will testify before a congressional committee.

It hasn’t been a smooth ride for Jerome Powell, who took over as chair of the Federal Reserve from Janet Yellen earlier this month. Powell received a rude welcome from the markets just after moving into his new office, as the global stock market correction erased some $4 trillion in valuations. The volatility forced Powell to make a public statement, reassuring the markets that the Fed was  closely monitoring the situation.

How will the dollar react to Powell’s testimony before the House Banking Committee? After the recent turmoil in the stock markets, Powell may opt to play it safe and keep away from any splashy headlines, which could lead to more fluctuation in the markets. Powell could choose to focus on the strong US economy and the Fed trimming its balance sheet, and steer away from a discussion of accelerating rate policy in order to head off higher inflation.

On Thursday, the ECB released the minutes of its January meeting. The markets were looking for some hints regarding future monetary policy, and policymakers indicated that they could re-examine the Bank’s monetary policy “early this year”. The ECB is keeping a close eye on inflation, which has been moving upwards. Still, with inflation below the ECB target of just below 2%, there is little talk about raising interest rates. Policymakers also indicated concern with exchange rates, a theme which has been addressed by Mario Draghi in recent weeks, given the appreciation of the euro – EUR/USD has climbed 2.8% since the start of the year. The minutes voiced “concerns about the recent volatility in the euro exchange rate, which represented a source of uncertainty that had to be monitored with respect to its implications for the medium-term outlook for price stability”. The euro has seen plenty of volatility in February, and currency volatility will likely be high on the agenda of the next policy meeting in March.

Will Dollar Rally or Fade on Fed Powell’s Comments?

EUR/USD Fundamentals

Tuesday (February 27)

• All Day – German Preliminary CPI. Estimate 0.5%
• 3:00 Spanish Flash CPI. Estimate 0.9%. Actual 1.1%
• 4:00 Eurozone M3 Money Supply. Estimate 4.6%. Actual 4.6%
• 4:00 Eurozone Private Loans. Estimate 2.9%. Actual 2.9%
• 5:00 German Buba President Jens Weidmann Speaks
• 5:16 Italian 10-year Bond Auction. Actual 2.06%
• 8:30 US Core Durable Goods Orders. Estimate 0.4%
• 8:30 US Fed Chair Jerome Powell Testifies
• 8:30 US Durable Goods Orders. Estimate -2.4%
• 8:30 US Goods Trade Balance. Estimate -72.3B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%
• 9:00 US HPI. Estimate 0.4%
• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.3%
• 10:00 US CB Consumer Confidence. Estimate 126.2
• 10:00 US Richmond Manufacturing Index. Estimate 15

*All release times are GMT

*Key events are in bold

EUR/USD for Tuesday, February 27, 2018

EUR/USD for February 27 at 6:50 EDT

Open: 1.2317 High: 1.2347 Low: 1.2308 Close: 1.2325

EUR/USD Technical

EUR/USD edged higher in the Asian session but gave up these gains. The pair has repeated this pattern in European trade

• 1.2286 is providing support
• 1.2357 is the next resistance line

Further levels in both directions:

• Below: 1.2286, 1.2200 and 1.2092
• Above: 1.2357, 1.2481, 1.2569 and 1.2660
• Current range: 1.2286 to 1.2357

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged in the Tuesday session. Currently, short positions are showing a majority (53%), indicative of EUR/USD reversing directions and moving 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.