EUR/USD – Higher German inflation helps steady euro

EUR/USD has steadied on Tuesday, after starting the week with considerable losses. Currently, the pair is trading at 1.1484, up 0.17% on the day. It’s another quiet day on the release front, with no major indicators. German WPI gained 0.5% in September, its highest level since May. The eurozone will release consumer confidence, which is expected to post a second straight reading of -3 points. In the U.S, the Richmond Manufacturing Index is expected to drop to 25 points. On Wednesday, Germany and the eurozone release Manufacturing PMIs.

The ECB holds its next policy meeting on Wednesday, and the bank is expected to hold the course with interest rate levels, which have been pegged at a flat 0.00% for almost three years. However, there are plenty of trouble spots, including the spike in Italian bond yields, the Brexit impasse and continuing volatility in global equity markets. Despite these issues, the ECB is expected to end its massive stimulus program in December. The markets are now looking ahead to 2019, focusing on the timing of a rate hike. The ECB has adhered to the line that rates will stay on hold “through the summer of 2019”. However, it’s unlikely that policymakers can ignore the issue of a rate hike, which would be a historic move, as the bank last raised rates in 2011. The head of the Dutch central bank, Klaas Knot, recently said that the ECB will have to initiate discussions over the timing of a rate hike in January. Investors will be keeping a close eye on the ECB, and any hints of an interest rate move could send the euro upwards.

Relations between the U.S and China remain tenuous, with the markets nervous that the trade war could worsen. The U.S Treasury Department released its semi-annual report on foreign exchange rates on Thursday, and there was some relief in the markets as the report did not name China as a currency manipulator. Still, the report said that the U.S was “deeply disappointed’ with that China refuses to disclose the extent of its foreign currency intervention. The Chinese yuan has slipped some 9 percent since April, and U.S officials are concerned that China has deliberately weakened the currency in order to counter U.S tariffs on Chinese goods, and will continue to monitor China’s currency practices.

Desperately seeking stability

Commodities Weekly: Oil at five-week low on uncertain demand outlook

Markets remain shrouded in a thick blanket of risk.

EUR/USD Fundamentals

Tuesday (October 23)

  • 2:00 German PPI. Estimate 0.3%. Actual 0.5%
  • 10:00 Eurozone Consumer Confidence. Estimate -3
  • 10:00 US Richmond Manufacturing Index. Estimate 25
  • 13:30 US FOMC Member Bostic Speaks

Wednesday (October 24)

  • 3:15 French Flash Manufacturing PMI. Estimate 52.4
  • 3:15 French Flash Services PMI. Estimate 54.7
  • 3:30 German Flash Manufacturing PMI. Estimate 53.5
  • 3:30 German Flash Services PMI. Estimate 55.5
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 53.1
  • 4:00 Eurozone Flash Services PMI. Estimate 54.5
  • 4:00 Eurozone M3 Money Supply. Estimate 3.5%
  • 4:00 Eurozone Private Loans. Estimate 3.2%
  • 9:00 Belgian NBB Business Climate. Estimate 0.5
  • 9:00 US HPI. Estimate 0.3%
  • 9:45 US Flash Manufacturing PMI. Estimate 55.5
  • 9:45 US Flash Services PMI. Estimate 54.1
  • 10:00 US New Home Sales. Estimate 630K
  • 10:30 US Crude Oil Inventories
  • 13:00 US FOMC Member Raphael Bostic Speaks
  • 13:10 US FOMC Member Loretta Mester Speaks
  • 14:00 US Beige Book

*All release times are DST

*Key events are in bold

EUR/USD for Tuesday, October 23, 2018

EUR/USD for October 23 at 6:10 DST

Open: 1.1465 High: 1.1486 Low: 1.1440 Close: 1.1484

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1190 1.1300 1.1434 1.1553 1.1611 1.1735

EUR/USD ticked lower in the Asian session but has reversed directions and moved higher in European trade

  • 1.1434 is under pressure in support
  • 1.1553 is the next line of resistance
  • Current range: 1.1434 to 1.1553

Further levels in both directions:

  • Below: 1.1434, 1.1300 and 1.1190
  • Above: 1.1553, 1.1611, 1.1735 and 1.1840

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

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.