EUR/USD – Euro Ticks Lower as German Manufacturing PMI Softens

The euro has posted small losses in the Wednesday session. Currently, the pair is trading at 1.2317, down 0.16% on the day. On the release front, German and Eurozone Manufacturing PMIs slowed in January. The German PMI dipped to 60.3, shy of the estimate of 60.6 points. It was a similar story with the Eurozone PMI, which dropped to 58.5, shy of the estimate of 59.2 points. In the US, the key event is the Federal Reserve minutes from the January meeting. The US will release Existing Home Sales, which are expected to climb to 5.61 million.

The Federal Reserve will be in the spotlight on Wednesday, with the release of the minutes from the January meeting, the last to have been chaired by Janet Yellen. The markets will be looking for hints regarding future rate policy, and any inkling of plans to raise interest rates more than three times in 2018 could trigger volatility in the currency markets as well as stock markets. Recent US numbers have been strong, and inflation indicators have been pointing upwards. This has raised concerns that the Fed may accelerate its pace of hikes, which triggered a sharp correction in global stock markets. The new chair of the Fed, Jerome Powell has tried to reassure the markets that the Fed is monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

Bitcoin, the most popular virtual currency, has shown sharp volatility in the past year, fluctuating between $900 and $19,000. These wild swings have drawn the attention of policymakers and lawmakers, as there are growing concerns that virtual currencies could have a negative economic impact. France and Germany want to put virtual currencies on the agenda at the next G-20 meeting, and there is bipartisan support in Congress to adopt new rules to regulate virtual currencies. However, Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions.

EUR/USD Fundamentals

Wednesday (February 21)

  • 3:00 French Flash Manufacturing PMI. Estimate 58.1. Actual 56.1
  • 3:00 French Flash Services PMI. Estimate 59.1. Actual 57.9
  • 3:30 German Flash Manufacturing PMI. Estimate 60.6. Actual 60.3
  • 4:00 German Flash Services PMI. Estimate 56.9. Actual 55.3
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 59.2. Actual 58.5
  • 4:00 Eurozone Flash Services PMI. Estimate 57.7. Actual 56.7
  • 9:45 US Flash Manufacturing PMI. Estimate 55.4
  • 9:45 US Flash Services PMI. Estimate 53.8
  • 10:00 US Existing Home Sales. Estimate 5.61M
  • 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

EUR/USD for Wednesday, February 21, 2018

EUR/USD for February 21 at 7:00 EDT

Open: 1.2337 High: 1.2345 Low: 1.2308 Close: 1.2318

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2092 1.2200 1.2286 1.2357 1.2481 1.2569

EUR/USD inched lower in the Asian session and is choppy 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 Wednesday session. Currently, short positions have a majority (58%), indicative of EUR/USD continuing to move 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.

FX Market Analysis – 20 February 2018 (Video)

Senior Market Analyst Craig Erlam discusses this week’s key event risks, with the most notable being the UK jobs report and BoE inflation report hearing.

Craig also gives his live analysis on EURUSD (11:04), GBPUSD (15:13), EURGBP (17:04), AUDUSD (18:36), USDCAD (20:02), GBPCAD (22:01), NZDUSD (24:47), USDJPY (25:44), GBPJPY (26:47) and EURJPY (28:24).

USD/JPY – Dollar Punches Above 107 Yen, Fed Minutes Ahead

Higher Yields Pushing Dollar Up

Intermezzo

EUR/USD – Euro Slips as German Economic Sentiment Softens

The euro has posted considerable losses on Tuesday, after a slow start to the week. Currently, the pair is trading at 1.2341, down 0.53% on the day. On the release front, German and eurozone confidence reports for February beat the estimates, but slowed compared to the January releases. German ZEW Economic Sentiment came in at 17.8, beating the estimate of 16.0 points. Eurozone ZEW Economic Sentiment dropped to 29.3, above the estimate of 28.4. German PPI improved to 0.5%, above the estimate of 0.3%. This marked the strongest reading since January 2017. There are no US releases on the schedule. On Wednesday, Germany and the eurozone release manufacturing PMIs. The Federal Reserve will release the minutes of its January meeting. As well, the US will release Existing Home Sales.

Federal Reserve chair Jerome Powell has just started his new job, and there is plenty on his plate. Strong US data in recent weeks has raised speculation that the Fed may need to accelerate the pace of interest rate hikes in 2018. The Fed is currently projecting three rate hikes this year, but if inflation continues to move upwards, many analysts are expecting that the Fed could press the rate trigger four or even five times in 2018. Meanwhile, concern over higher inflation and more rate hikes sent the stock markets into a frenzy. Powell sought to reassure the markets that the Fed was monitoring the situation, but it’s doubtful that the Fed can do much to prevent volatility in the markets.

Should cryptocurrencies be regulated? The recent turbulence in the global stock markets has triggered strong volatility in the currency markets, and ECB President Mario Draghi recently stated that the ECB was concerned about the euro’s sharp fluctuations. Last week, Draghi weighed in on Bitcoin, a cryptocurrency which has seen wild fluctuations in recent months. There are growing calls for regulation of these currencies, and central banks could play a key role in such oversight. However, Draghi poured cold water on any ECB involvement, saying that it was not the ECB’s responsibility to ban or regulate Bitcoin. Draghi added that the ECB was exploring the use of blockchain, a digital technology to monitor bitcoin transactions. France and Germany want to cryptocurrencies on the agenda at the next G-20 meeting, and there is bipartisan support in Congress to adopt new rules to regulate virtual currencies.

Higher Yields Pushing Dollar Up

EUR/USD Fundamentals

Tuesday (February 20)

  • 2:00 German PPI. Estimate 0.3%. Actual 0.5%
  • 5:00 German ZEW Economic Sentiment. Estimate 16.0. Actual 17.8
  • 5:00 Eurozone ZEW Economic Sentiment. Estimate 28.4. Actual 29.3
  • All Day – ECOFIN Meetings
  • 10:00 Eurozone Consumer Confidence. Estimate 1

Wednesday (February 21)

  • 3:00 French Flash Manufacturing PMI. Estimate 58.1
  • 3:00 French Flash Services PMI. Estimate 59.1
  • 3:30 German Flash Manufacturing PMI. Estimate 60.6
  • 4:00 German Flash Services PMI. Estimate 56.9
  • 4:00 Eurozone Flash Manufacturing PMI. Estimate 59.2
  • 4:00 Eurozone Flash Services PMI. Estimate 57.7
  • 10:00 US Existing Home Sales. Estimate 5.61M
  • 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

EUR/USD for Tuesday, February 20, 2018

EUR/USD for February 20 at 6:00 EDT

Open: 1.2407 High: 1.2412 Low: 1.2345 Close: 1.2333

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2092 1.2200 1.2286 1.2357 1.2481 1.2569

EUR/USD has posted slight losses in the Asian session and continues to lose ground in European trade

  • 1.2286 is providing support
  • 1.2357 was switched to a resistance role after considerable losses by EUR/USD on Tuesday

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 unchanged in the Tuesday session. Currently, short positions have a majority (60%), indicative of EUR/USD breaking out 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.

Intermezzo

Intermezzo
It was a predictable snoozefest in FX overnight as global holiday sessions crimped activity. And adding to the void, there was scant data during European hours which severely nipped action as traders had few if any fundamental guideposts.

But the markets interlude included the usual holiday- liquidity induced mystery move as the dollar went bid at the NY open. But the step was humble and little more than an attempt to trigger some stops in low liquidity market conditions. But all near-term support levels held and the move and quickly retracted as there was no news to support the quickstep sell-off. Chalk it up to the ghosts of presidents past.

Currency markets have remained relatively muted with few if any headlines to sink one’s teeth into but as the markets pivot to Fed speak and the FOMC minutes this week, “deficit mania” is sounding a few decibels lower this morning.But none the less, ongoing concerns about swelling deficit’s and the Feds sequence of interest rate normalisation should be the markets key focus this week and the primary drivers of near-term volatility.
Oil Markets

Oil prices have started the week on a positive note.With risk aversion abating, equity markets have remained guardedly positive. Also, an escalation of middle east tensions on the back of Israeli Prime Minister Benjamin Netanyahu beating the war drums by suggesting that Isreal could act against Iran alone has nudged prices higher. Predictably this warmongering has put the region on a state of readiness fearing a head to head incident and boosted oil prices due to the fear of sizable supply disruptions. Of course, when Isreal comes into the equation it could spark contagion across a region

Also, convincing signals from OPEC and their partners to extend production cuts continues to resonate with investors.

Gold Markets

Gold prices slid lower overnight on a drop in volatility and a slightly stronger dollar. Selling pressure emerged after USD speculative buyers emerged along with some position short covering ahead of the plethora of critical Fed speak and of course the FOMC minutes. But given the late-January Fed meeting was primarily interpreted as Hawkish; the bar is high for the minutes to sound an even more Hawkish note,  but they will still attract the lions share of attention.

Given that the sun seldom shines on a capital hill along with escalating middle east tension, on the first sign of a dollar downdraft gold with ratchet higher.

G-10

The Japanese Yen

Markets are focusing on Friday’s crucial Japan CPI print, and with all the recent chatter about the BoJ extending YCC in perpetuity given the stronger Yen, short-term traders are paring back bearish dollar bets. And with a relative sense of calm in overall volatility,  dollar bears are taking an interlude in holiday thinned-trading conditions

The Euro

Very little buying interest yesterday after Friday’s sell-off so given the lack of demand the Euro could fall to low 1.23  on even minor unexpected hic-up on news flow given thin liquidity conditions. But dips should look attractive for long-term players.

The Malaysian Ringgit

Very quiet trading session to start the week with local trader biding time until the FOMC minutes release. In the meantime, the broader USD sentiment will dictate the pace of play for regional currencies and imparticular the USDJPY which is moving towards 107 which is mildly negative for the MYR

On a favourable note, Oil prices remain robust on the escalation of middle east tension and production cut compliance among OPEC members which should provide support for the MYR.

EUR/USD – Is the Rally Running Out of Steam?

Are We Looking at an Overcrowded Market?

It’s difficult to find anyone at the moment that isn’t bullish on this pair in the long term and under the current circumstances, they may have a point. However, these markets don’t move in a straight line (even bitcoin as the last couple of months has shown us) and corrections along the way are both normal and healthy.

So when I ask if the rally is running out of steam, I’m not necessarily calling a top in the pair and in this case, I’m certainly not. What I’m suggesting is that the recent run higher – and once again it’s been a good one – may be looking a little overstretched and a pull-back could be on the cards.

The pair first started to look a little overbought earlier this month when it failed to make a new high and even appeared to have formed a small double top, but as we saw, the dollar bashing wasn’t quite over yet and despite breaking the neckline, we didn’t see much of a pull-back before it was once again tearing higher.

EURUSD Daily Chart

OANDA fxTrade Advanced Charting Platform

Once again though, we find ourselves testing the 1.25 region and we appear to be finding a lot of resistance. The two notable differences on this occasion though is that we did make a new high and we did not have the momentum indicators – MACD and stochastic – confirming the moves. This has left us with a negative divergence between price and momentum that is red flag for the bulls.

USD/JPY – Yen Edges Lower in Thin Holiday Trade

It’s worth noting at this point that a divergence in itself is not a sell signal, nor does it indicate that a pair won’t make a new high. It quite easily could, although if it does so with less momentum again, this would be a second red flag and further suggest that a correction may be coming. If a new high is made on rising momentum it would, however, suggest that bulls have found further reason to be bullish and negate the previous red flag warning.

With the pair now showing a divergence though and Friday’s daily candle looking rather bearish, having rallied above Thursday’s high and closed well below its low, I wonder whether the downside is at least going to be tested.

The first interesting level for me is 1.2320, this was a resistance level in mid-January that became support shortly after and then the neckline of the double top that never fully completed it’s corrective projection. While we broke above here quite easily on the way back up, it could prove more tricky this time if indeed the market is still bullish. A break below may be an early correction confirmation signal.

Gold Trading Sideways in Thin Holiday Trade

The more interesting level is 1.22 though, with it being roughly the area where the last two dips found support. A failure to do so on this occasion would be a bearish signal and could create an imperfect double top with the neckline here and the peaks being 25 January and 16 February highs. It would also signal an arguably overdue correction in the dollar with the last having been a little brief considering the move that preceeded it.

Given the size of the double top – roughly 1.25 to 1.22 – this could give us a possible price projection of 300 pips, creating possible support around 1.19. This would bring us back to a prior area of support and resistance and represent a 61.8% retracement from the November lows to the recent highs at which point traders longer term bullish appetite could be tested.

EUR/USD – Euro Hits 3-Year Higher as German Inflation Jumps

The euro rally is steady in the Friday session. Currently, the pair is trading at 1.2503, down 0.02% on the day. On the release front, the German Wholesale Price Index climbed 0.9% in January, rebounding from a reading of 0.3% in December. In the US, Building Permits is expected to inch lower to 1.30 million, and Housing Starts are projected to improve to 1.23 million. As well, UoM Consumer Sentiment is expected to rise to 95.4 points.

The euro continues to trade above the 1.25 level this week. Earlier on Friday, EUR/USD touched its highest level since December 2014, as the US dollar remains under broad pressure. The euro has posted winning sessions every day this week, and the currency has gained 2.1% this week. US inflation indicators pointed upwards this week, but investors chose to focus on soft retail sales reports for January – Retail Sales posted a flat reading of 0.0%, and Core Retail Sales declined 0.3%, marking its first decline in five months.

The recent volatility in the currency markets has not gone unnoticed by Mario Draghi & Co. Last week, the ECB head expressed confidence that eurozone inflation is moving closer to the Bank’s target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are on the lookout for hints as to whether the ECB will normalize policy and wind up stimulus in September. Any hints from ECB policymakers about a change in policy could have a strong impact on the movement of the euro.

US Bond Auction TIPS the dollar

EUR/USD Fundamentals

Friday (February 16)

  • 2:00 German WPI. Estimate 0.2%. Estimate 0.9%
  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.23M
  • 8:30 US Import Prices. Estimate 0.6%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4
  • 10:00 US Preliminary UoM Inflation Expectations

*All release times are GMT

*Key events are in bold

 

EUR/USD for Friday, February 16, 2018

EUR/USD for February 16 at 5:40 EDT

Open: 1.2506 High: 1.2556 Low: 1.2497 Close: 1.2503

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2286 1.2357 1.2481 1.2569 1.2660 1.2751

EUR/USD posted gains in the Asian session but has retracted in European trade

  • 1.2481 is providing support role
  • 1.2569 is a weak resistance line

Further levels in both directions:

  • Below: 1.2481, 1.2357, 1.2286 and 1.2200
  • Above: 1.2569, 1.2660 and 1.2751
  • Current range: 1.2481 to 1.2569

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Friday session. Currently, short positions have a majority (63%), 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.

EUR/USD – Euro Rise Continues on Broad Dollar Weakness

The euro continues its upward movement and has posted gains in the Thursday session.  Currently, the pair is trading at 1.2483, up 0.27% on the day. In the eurozone, the trade surplus continues to grow, climbing to EUR 23.8 billion. This beat the forecast of EUR 22.4 billion. It’s a busy day in the US, highlighted by PPI and Core PPI reports for January. Both indicators are expected to record gains after declining in the December readings. The US will also release key manufacturing reports and unemployment claims. On Friday, the US releases key housing and consumer confidence numbers.

The euro has posted winning sessions every day this week, and continues to move upwards on Thursday. The euro has gained 1.8% this week, and posted strong gains on Wednesday, after the US releases pointed to stronger inflation and dismal retail sales.

The US dollar remains under strong pressure after Wednesday’s CPI and retail sales reports. CPI jumped 0.5%, above the estimate of 0.3%. Consumer spending reports in January were dismal. Retail Sales was flat at 0.0%, short of the estimate of 0.5%. Core Retail Sales declined 0.3%, well off the forecast of +0.2%. A catalyst for the recent market sell-off was fear of higher inflation, and with inflation indicators pointing upwards, the dollar and the stock markets could be in for rough ride in the coming weeks.

The recent stock market turbulence has triggered volatility in the currency markets, and this is causing concern at the ECB. Last week, ECB President Mario Draghi said that he is more confident that eurozone inflation is moving closer to the Bank’s target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are on the lookout for hints as to whether the ECB will normalize policy and wind up stimulus in September.

At the Edge of a Cliff

EUR/USD Fundamentals

Thursday (February 15)

  • 4:00 Italian Trade Balance. Estimate 4.44B. Actual 5.25B
  • 5:00 Eurozone Trade Balance. Estimate 22.4B. Actual 23.8B
  • Tentative – Spanish 10-year Bond Auction. Actual 1.58%
  • 8:30 US PPI. Estimate 0.4%
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US Empire State Manufacturing Index. Estimate 17.7
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.5
  • 8:30 US Unemployment Claims. Estimate 229K
  • 9:15 US Capacity Utilization Rate. Estimate 78.0%
  • 9:15 US Industrial Production. Estimate 0.2%
  • 10:00 US NAHB Housing Market Index. Estimate 72
  • 10:30 US Natural Gas Storage. Estimate -193B
  • 16:00 US TIC Long-Term Purchases. Estimate 50.3B

Friday (February 16)

  • 2:00 German WPI. Estimate 0.2%
  • 8:30 US Building Permits. Estimate 1.29M
  • 8:30 US Housing Starts. Estimate 1.23M
  • 8:30 US Import Prices. Estimate 0.6%
  • 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, February 15, 2018

EUR/USD for February 14 at 5:30 EDT

Open: 1.2450 High: 1.2510 Low: 1.2448 Close: 1.2483

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2286 1.2357 1.2481 1.2569 1.2660 1.2751

EUR/USD continues to break through resistance lines. The pair inched higher in the Asian session and has recorded stronger gains in European trade

  • 1.2481 has switched to a support role after gains by the pair on Thursday
  • 1.2569 is the next resistance line

Further levels in both directions:

  • Below: 1.2481, 1.2357, 1.2286 and 1.2200
  • Above: 1.2569, 1.2660 and 1.2751
  • Current range: 1.2481 to 1.2569

OANDA’s Open Positions Ratio

EUR/USD ratio is showing gains in short positions, as EUR/USD continues to move higher and cover long positions. Currently, short positions have a majority (61%), 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.

EUR/USD – Euro Unchanged as German GDP, CPI Matches Forecasts

The euro has shown some movement in both directions but is unchanged in the Wednesday session.  Currently, the pair is trading at 1.2356, up 0.04% on the day. It’s a busy day for fundamentals, with key releases out of the eurozone and the US. In Germany, Preliminary GDP slowed to 0.6% in the fourth quarter, matching the estimate. Final CPI declined 0.7%, also matching the forecast. Eurozone Flash GDP for Q4 remained steady at 0.6% for a third straight quarter, matching the estimate. In the US, the markets are expecting mixed inflation numbers. Core CPI is expected to expected to edge lower to 0.2%, while CPI is forecast to improve to 0.1%. The US will also release retail sales reports. Retail Sales is forecast to slow to 0.2%, while Core CPI is forecast to accelerate to 0.5%. Traders should be prepared for movement from EUR/USD during the North American session.

The stock market sell-off has triggered some volatility in the currency markets, and this is causing concern at the ECB. Last week, ECB President Mario Draghi said that he is more confident that eurozone inflation is moving closer to the Bank’s target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. Draghi’s concerns about the exchange rate are likely even stronger, after the euro fell 1.6 percent last week. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are on the lookout for hints as to whether the ECB will normalize policy and wind up stimulus in September.

Global stock markets have steadied after last week’s turbulence, but investors remain wary. Wednesday’s US inflation numbers will be closely watched, as inflation fears was a key catalyst of the massive sell-off. The new head of the Federal Reserve, Jerome Powell, sought to send a reassuring message on Tuesday, saying that the Fed is on alert to any risks to financial stability. However, it is clear that the Fed’s hand is limited when it comes to stock markets moves, and the volatility which we saw last week could resume at any time.

The day of reckoning

 

EUR/USD Fundamentals

Wednesday (February 14)

  • 2:00 German Preliminary GDP. Estimate 0.6%. Actual 0.6%
  • 2:00 German Final CPI. Estimate -0.7%. Actual -0.7%
  • 3:00 German Buba President Weidmann Speaks
  • 4:00 Italian Preliminary GDP. Estimate 0.4%. Actual 0.3%
  • 5:00 Eurozone Flash GDP. Estimate 0.6%. Actual 0.6%
  • 5:00 US Industrial Production. Estimate 0.1%. Actual 0.4%
  • Tentative – German 30-year Bond Auction
  • 8:30 US CPI. Estimate 0.3%
  • 8:30 US Core CPI. Estimate 0.2%
  • 8:30 US Core Retail Sales. Estimate 0.2%
  • 8:30 US Retail Sales. Estimate 0.5%
  • 10:00 US Business Inventories. Estimate 0.3%
  • 10:30 US Crude Oil Inventories. Estimate 2.8M

Thursday (February 15)

  • 5:00 Eurozone Trade Balance. Estimate 22.4B
  • 8:30 US PPI. Estimate 0.4%
  • 8:30 US Empire State Manufacturing Index. Estimate 17.7
  • 8:30 US Philly Fed Manufacturing Index. Estimate 21.5
  • 8:30 US Unemployment Claims. Estimate 229K

*All release times are GMT

*Key events are in bold

 

EUR/USD for Wednesday, February 14, 2018

EUR/USD for February 14 at 6:00 EDT

Open: 1.2351 High: 1.2393 Low: 1.2346 Close: 1.2356

 

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.2092 1.2200 1.2286 1.2357 1.2481 1.2569

EUR/USD inched higher in the Asian session and has retracted in European trade

  • 1.2286 is providing support
  • 1.2357 was tested earlier in resistance and is under strong pressure

Further levels in both directions:

  • Below: 1.2286, 1.2200, 1.2092 and 1.1961
  • Above: 1.2357, 1.2481 and 1.2569
  • Current range: 1.2286 to 1.2357

OANDA’s Open Positions Ratio

EUR/USD ratio is almost unchanged in the Wednesday session. Currently, short positions have a majority (54%), indicative of EUR/USD breaking out and moving lower.

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.

US Dollar Rout Continues With Inflation Data in the Horizon

Safe haven flows after the stock market collapse favour JPY and CHF

The US dollar is once again on the back foot on Tuesday. The currency is softer against major pairs ahead of key US inflation data for January. The U.S. Federal Reserve along with traders will be looking at the consumer price figures for signs of higher inflation and further validations of their plans to keep raising US interest rates in 2018. The U.S. non farm payrolls (NFP) report earlier in the month boosted the USD with a positive wage growth signal at 0.3 percent monthly gain. The market will be watching the core CPI released on Wednesday, February 14 at 8:30 am EST looking for confirmation.

  • US January inflation expected to underperform
  • US Oil producers putting downward pressure on prices
  • US inflation trend to continue on Thursday with the release of the PPI



The EUR/USD gained 0.52 percent on Tuesday. The single currency is trading at 1.2355 ahead of the release of monthly inflation and retail sales data in the US. The U.S. Federal Reserve is expected to lift rates 3 or more times this year, but to do so it would need inflation in the US to pick up, as this was the biggest debate within the central bank last year. Doves within the Federal Open Market Committee (FOMC) are pushing for more patience, until inflation rises, while the hawks who lost Chair Yellen as their biggest supporter would rather raise rates sooner rather than later. The core consumer price index, the Fed pays more attention to this data point that excludes food and energy, is expected to come in at 0.2 percent. Retail sales are forecasted to have gained 0.2 percent in January, but the core reading to have advanced by 0.5 percent by removing auto sales.

The tumble in stocks prices has had a negative effect on the confidence in the US economy. The employment report released on February 2 posted higher than forecasted number of jobs and more importantly hourly wages rose by 0.3 percent. Several dollar rallies that started with a strong employment report have been cut short by disappointing inflation and retail sales data. This time around the USD has not been able to find solid footing in 2018. With a stock market correction and bond yields at four year highs inflation takes a more important role as it could solidify the case of Fed hawks and make way for a 4 rate hike scenario. The USD has been impacted by improving growth around the globe and other central banks have hiked or signalled and end to low rates cutting the lead of the U.S. Federal Reserve and reducing the attractiveness of the dollar. A higher than expected inflation figure could trigger a US currency recovery alongside a drop in the stock market as higher rates would be forthcoming. Vice versa a lower than expected consumer price gain could sink the dollar even lower as the market is already pricing in 3 rate hikes and could start reevaluating that position with weak inflationary pressures.

European politics have reached some stability with the German coalition now in place but with the upcoming Italian elections in March the boat is sure to rock. Economic fundamentals have been strong in the eurozone with Germany leading the way as usual. The gap between the U.S. Federal Reserve and the European Central Bank (ECB) is closing with regarding monetary policy. The ECB is expected to end its QE program and could even lift interest rates later this year. The week will bring minor indicator releases in Europe with the German central bank chief Jens Weidmann speaking in Frankfurt on Wednesday, February 14 at 3:00 am EST. Earlier that day the GDP figures for Germany will be released with a 0.6 percent growth expected.



The USD/JPY lost 0.84 percent in the last 24 hours. The currency pair is trading at 107.73 as the JPY has benefited from risk aversion and risk appetite moves. Usually the USD is the main beneficiary of a risk aversion move, but given some of the global uncertainty is happening in Washington and Wall Street the greenback is not the sturdiest safe haven for investors. The USD is soft ahead of inflation and retail sales data with both having to overcome concerns.

The Japanese Prime Minister Shinzo Abe is expected to reappoint Haruhiko Kuroda as the head of the Bank of Japan (BOJ) for his second term and that in itself could be a sign the central bank is ready to start dealing back some of its massive stimulus program.

Market events to watch this week:

Wednesday, February 14
8:30am USD CPI m/m
8:30am USD Core CPI m/m
8:30am USD Core Retail Sales m/m
8:30am USD Retail Sales m/m
10:30am USD Crude Oil Inventories
7:30pm AUD Employment Change
Thursday, February 15
8:30am USD PPI m/m
Friday, February 16
4:30am GBP Retail Sales m/m
8:30am USD Building Permits

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar