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Euro Edges Above 1.09, US Advance GDP Next

Euro Edges Above 1.09, US Advance GDP Next

EUR/USD has edged higher in the Friday session, as the pair trades slightly above the 1.09 line. On the release front, Germany will release Preliminary CPI. In the US, today’s key release is Advance GDP, with the estimate standing at 2.5%. We’ll also get a look at consumer confidence levels, with the release of UoM Consumer Confidence. The markets are expecting the indicator to drop to 88.2 points.

The German economy, the largest in the Eurozone, has shown signs of improvement. This has prompted the government to upgrade its growth forecast from 1.7 percent to 1.8 percent for 2016.As the largest economy in the Eurozone, Germany’s economic indicators are closely watched, as they are considered a bellwether of economic activity in the Eurozone economy. In October, German consumer confidence was lower than expected. GfK Consumer Climate dipped below the symbolic ten-point mark for the first time since May. Business confidence took the opposite direction, as German Ifo Business Climate rose to 110.5 points in October, improving for a second straight month. Earlier in the month, the well-respected ZEW German economic sentiment surveys for Germany also pointed upwards. The German economy has shown signs of improvement, prompting the government to upgrade its growth forecast from 1.7 percent to 1.8 percent for 2016. At the same time, inflation levels remain low and German Preliminary CPI is expected to remain unchanged at a negligible 0.1%.

The markets are expecting a strong Advance GDP release for the third quarter and if the data doesn’t disappoint, the odds of a rate hike in December will likely increase. Currently, a hike is priced in at impressive 72 percent. The prospect of a US rate hike for the first time in a year has bolstered the US dollar against its rivals, including the euro. EUR/USD is down 2.8 percent in October, as the euro struggles to remain above the 1.09 line. The US economy remains strong, buoyed by a labor market that is close to capacity, with unemployment at a healthy 5.0%. Inflation levels, however, remain low and are unlikely to show much improvement in the next few months. Although the Fed would prefer stronger inflation, other economic indicators remain strong enough such that the lack of inflation is unlikely to be the critical factor in the Fed rate decision. The Fed will also hold a policy meeting in early November, but is unlikely to make any rate moves just before the US presidential election.

EUR/USD Fundamentals

Friday (October 28)

  • 5:30 French Preliminary GDP. Estimate 0.3%. Actual 0.2%
  • All Day – German Preliminary CPI. Estimate 0.1%
  • 6:45 French Consumer Spending. Estimate 0.3%. Actual -0.2%
  • 6:45 French Preliminary CPI. Estimate 0.2%. Actual 0.0%
  • 7:00 Spanish Flash CPI. Estimate 0.3%. Actual 0.7%
  • 7:00 Spanish Flash GDP. Estimate 0.7%. Actual 0.7%
  • Tentative – Italian 10-year Bond Auction
  • 12:30 US Advance GDP. Estimate 2.5%
  • 12:30 US Advance GDP Price Index. Estimate 1.3%
  • 12:30 US Employment Cost Index. Estimate 0.6%
  • 14:00 US Revised U0M Consumer Sentiment. Estimate 88.2
  • 14:00 US Revised UoM Inflation Expectations

*All release times are EDT

* Key events are in bold

EUR/USD for Friday, October 28, 2016

EUR/USD Oct 27, To Oct 28,2016

EUR/USD October 28 at 9:40 GMT

Open: 1.0897 High: 1.0925 Low: 1.0894 Close: 1.0904

EUR/USD Technicals

  • EUR/USD has shown limited movement in the Asian and European sessions
  • 1.0821 is providing support
  • There is resistance at 1.0957

Further levels in both directions:

  • Below: 1.0821, 1.0708 and 1.0616
  • Above: 1.0957, 1.1054, 1.1150 and 1.1278
  • Current range: 1.0821 to 1.0957

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Friday session. Currently, long positions have a strong majority (60%), indicative of trader bias towards EUR/USD breaking out and moving to higher ground.

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