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EUR/USD: Euro Remains At 1.10, ECB Rate Announcement Looms

EUR/USD: Euro Remains At 1.10, ECB Rate Announcement Looms

EUR/USD remains close to the 1.10 line on Wednesday. The pair has stayed close to this symbolic level throughout the week. Will this change on Thursday, following the ECB rate decision? On the Wednesday schedule, there are no major Eurozone releases. In the US, we’ll get a look at Building Permits and Crude Oil Inventories. On Thursday, the US releases the Philly Fed Manufacturing Index and unemployment claims.

The ECB is not expected to make any changes to its current monetary stance at its policy meeting, but there has been talk of the bank tapering its asset-purchase program. Mario Draghi’s press conference often has more impact on the currency markets than the ECB statement.

The ECB’s QE program is scheduled to terminate in March 2017 and analysts will be watching closely for signs that the ECB is planning to extend the program. The ECB may opt to wait until December to make any significant announcements about QE until December, following the release of the bank’s updated quarterly forecasts.

Weak Eurozone inflation levels have long been a major headache for policymakers, who have had to deal with fears of deflation for much of 2016. However, September brought better tidings on the inflation front. Final CPI improved to 0.4%, matching the forecast. This marked the highest monthly gain since October 2014. Still, this modest gain remains well below the ECB’s inflation target of just below 2.0%, so it’s doubtful that the ECB will make any significant moves at its policy meeting on Thursday.

On Tuesday, US consumer inflation numbers were a mixed bag. CPI edged up to 0.3%, up from 0.2% a month earlier. This was the strongest gain since April. Core CPI went the opposite direction, slipping to 0.1%, down from 0.3% a month earlier. These numbers could have an important bearing on the Fed’s interest rate decision in December.

Currently, a December rate hike is currently priced in at 64 percent. Meanwhile, US consumer spending impressed in September. Retail sales gained 0.5%, while core retail sales jumped 0.6%, as both key indicators rebounded from declines in August. PPI was steady at 0.3%, but the UofM Consumer Sentiment Index disappointed, dropping to 87.9 points and missing expectations. This marked the weakest reading since September 2015.

EUR/USD Fundamentals

Wednesday (October 19)

  • Tentative – German 30-year Bond Auction
  • 12:30 US Building Permits. Estimate 1.17M
  • 12:30 US Housing Starts. Estimate 1.18M
  • 14:30 US Crude Oil Inventories. Estimate 2.2M
  • 18:00 US Beige Book
  • 23:45 US FOMC Member William Dudley Speaks

Upcoming Key Events

Thursday (October 20)

  • 11:45 ECB Minimum Bid Rate. Estimate 0.00%
  • 12:30 ECB Press Conference
  • 12:30 US Philly Fed Manufacturing Index. Estimate 5.2
  • 12:30 US Unemployment Claims. Estimate 251K

*All release times are EDT

* Key events are in bold

EUR/USD for Wednesday, October 19, 2016

EUR/USD Oct 18 – 20 Chart

EUR/USD October 19 at 9:00 GMT

Open: 1.0975 High: 1.1000 Low: 1.0972 Close: 1.0995

EUR/USD Technical

  • EUR/USD was choppy in the Asian session. The pair has posted small gains in the European session
  • 1.0957 is providing support
  • There is resistance at 1.1054

Further levels in both directions:

  • Below: 1.0957, 1.0821 and 1.0708
  • Above: 1.1054, 1.1150, 1.1278 and 1.1376
  • Current range: 1.0957 to 1.1054

OANDA’s Open Positions Ratio

EUR/USD ratio is showing slight gains in long positions. Currently, long positions have a strong majority (62%), indicative of trader bias towards EUR/USD continuing to move upwards.

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