Euro Woes Continue After Fed Statement
MarketPulse | Sep 18, 2014 08:07AM ET
After limited movement for more than a week, the euro took a hit late Wednesday after the Federal Reserve policy statement. The EUR/USD has steadied on Thursday, as the pair trades in the high-1.28 range in the European session. Taking a look at Thursday's releases, the ECB announced its first Targeted Long Term Refinancing Option (TLTRO) of 82.6 billion euros. In the US, there are three key events on the calendar - Building Permits, Unemployment Claims and the Philly Fed Manufacturing Index. As well, Federal Reserve Chair Janet Yellen will deliver remarks at an event in Washington.
The US dollar gained close to 100 points on Wednesday following the Federal Reserve statement. The Fed statement reaffirmed that interest rates would remain ultra-low for a "considerable time" after the asset purchase scheme (QE) ends next month, but surprised the markets in hinting that once a rate hike was introduced, rate levels could move up more quickly than expected. As expected, the Fed trimmed QE by $10 billion/month, and the remaining $15 billion/month is scheduled to be phased out in October.
In an effort to combat deflation in the Eurozone, the ECB announced the results of its first TLTRO. This lending program aims to bolster the economy by increasing bank lending to the real economy. The ECB said that the take-up by European banks amounted to 82.3 billion euros, which was well short of estimates that ranged from 100-300 billion. Still, it's too early to declare the program a failure, and traders and investors will have to wait till the next TLTRO in December before reaching conclusions as to the scheme's success.
US inflation data was worse than expected on Wednesday. CPI, the primary gauge of consumer inflation, came in at -0.2%, its first drop since October. The estimate stood at +0.1%. Core CPI followed suit with a flat reading of 0.0%. This was the first time the index failed to post a gain since October 2010. The weak numbers follow disappointing manufacturing inflation data. PPI, a key event, dipped to just 0.0%, a 3-month low. The estimate stood at 0.1%. Core PPI slipped to 0.1%, down from 0.2% a month earlier. This matched the forecast. Low inflation continues to be a concern and could delay an interest rate hike in 2015.
Earlier in the week ,German ZEW Economic Confidence, a key event, slipped to 6.9 points last month. The indicator has now dropped over nine consecutive months, down from a high of 62.0 points back in November. Eurozone ZEW Economic Sentiment followed a similar downturn, coming in at 14.2 points, its eighth straight decline. The German indicator managed to beat the estimate of 5.2 points, but the Eurozone figure was well short of the forecast of 21.3 points. The weak data points to weak confidence in the German and Eurozone economies, which does not bode well for the slumping euro.
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EUR/USD September 18 at 11:00 GMT
EUR/USD 1.2880 H: 1.2907 L: 1.2849
EUR/USD Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 1.2518 | 1.2688 | 1.2806 | 1.2905 | 1.2984 | 1.3104 |
- EUR/USD edged higher in the Asian and European sessions. The pair briefly broke above support at 1.2905 but retracted.
- 1.2806 is providing strong support. It has remained firm since July 2013.
- 1.2905 has reverted to a resistance role is under strong pressure. 1.2984 is next.
- Current range: 1.2806 to 1.2905
Further levels in both directions:
- Below: 1.2806, 1.2688 and 1.2518 and 1.2353
- Above: 1.2905, 1.2984, 1.3104, 1.3175 and 1.3288
OANDA's Open Positions Ratio
EUR/USD ratio is pointing to gains in long positions on Thursday. This is consistent with the movement of the pair, as the euro has posted slight gains. The ratio has a majority of long positions, indicative of trader bias towards the euro moving upwards.
EUR/USD Fundamentals
- 9:20 ECB Targeted LTRO. Actual 82.6B.
- 12:30 US Building Permits. Estimate 1.04M.
- 12:30 US Unemployment Claims. Estimate 312K.
- 12:30 US Housing Starts. Estimate 1.04M.
- 12:45 US Fed Chair Janet Yellen Speaks.
- 14:00 US Philly Fed Manufacturing Index. Estimate 22.8 points.
- 14:30 US Natural Gas Storage. Estimate 91B.
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