EUR/USD – Steady Ahead of ECB Policy Meeting

It’s been a quiet ride for the euro this week, as the euro treads softly at the 1.09 level in Thursday’s European session. The lack of movement we’re seeing from the pair could change on Thursday, as the ECB holds its monthly monetary policy meeting. In the US, today’s highlights are Unemployment Claims and the Philly Fed Manufacturing Index.

EUR/USD has been drifting, but this could change in a hurry after the ECB policy meeting on Thursday. The ECB will set its benchmark interest rate and issues a policy statement, followed by a press conference hosted by Mario Draghi, head of the ECB. The Eurozone economy has had decent start to 2016, although inflation levels remain much lower than the ECB’s target of 2.0%. This was underscored earlier in the week, as Eurozone CPI in December remained unchanged at 0.2%. Germany is not immune from a lack of inflation, as German PPI posted a decline of 0.5% in December, its sixth decline in seven months. If Draghi does surprise the markets with additional easing steps, the euro could lose ground.

Weak US inflation indicators remain a concern for Federal Reserve policymakers, who must decide whether another rate hike would be appropriate in early 2016. This was underscored on Wednesday, as key inflation numbers missed their estimates. CPI dropped 0.1%, short of the estimate of 0.0%. Core CPI also softened, posting a gain of 0.1%. This was short of the forecast of 0.2%. Will these weak numbers dampen Fed enthusiasm for a rate hike? There is speculation that the Fed could make a move in March, contingent on the US economy continuing to show strong numbers. At the same time, minutes from the Federal Reserve Policy meeting in December indicated that some policymakers are concerned that the inflation picture may not improve anytime soon, and it would be premature to raise rates again before inflation levels improve.

EUR/USD Fundamentals

Thursday (Jan. 21)

  • 7:45 ECB Minimum Bid Rate. Estimate 0.05%
  • 8:30 ECB Press Conference
  • 8:30 US Philly Fed Manufacturing Index. Estimate -5.8 points
  • 8:30 US Unemployment Claims. Estimate 279K
  • 10:00 Eurozone Consumer Confidence. Estimate -6 points
  • 10:30 US Natural Gas Storage. Estimate -180B
  • 11:00 US Crude Oil Inventories. Estimate 3.3M

Friday (Jan. 22)

Upcoming Key Events

  • 2:45 ECB President Mario Draghi Speaks
  • 3:00 French Flash Manufacturing PMI. Estimate 51.6 points
  • 3:30 German Flash Manufacturing PMI. Estimate 53.0 points

*Key events are in bold

*All release times are EST

EUR/USD for Thursday, January 21, 2016

EUR/USD January 21 at 4:15 EST

Open: 1.0874 Low: 1.0867 High: 1.0921 Close: 1.0900

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0659 1.0732 1.0847 1.0941 1.1087 1.1172
  • EUR/USD was choppy in the Asian session and has leveled off in European trade
  • 1.0941 was tested earlier and remains a weak resistance line.
  • 1.0847 is providing support
  • Current range: 1.0847 to 1.0941

Further levels in both directions:

  • Below: 1.0847, 1.0732, 1.0659 and 1.0537
  • Above: 1.0941, 1.1087 and 1.1172

OANDA’s Open Positions Ratio

EUR/USD ratio is showing a reversal in directions, with movement towards long positions. Short positions still command a majority (54%). This is indicative of trader bias towards the euro moving downwards.

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 and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.