With few fundamental indicators so far this week, the euro remains subdued in the Thursday session. Currently, the euro is trading slightly above the 1.10 line. We could see some activity later today from EUR/USD, as the ECB will release its rate decision and Mario Draghi holds a follow-up press conference. The ECB is expected to hold the benchmark rate at a flat 0.00%. There are no other Eurozone events on the schedule. Over in the US, it’s a busy day, with three key indicators – Unemployment Claims, the Philly Fed Manufacturing Index and Existing Home Sales.
All eyes are on the ECB, which will announce its rate decision later on Thursday. With weak growth and low inflation, there is pressure on the ECB to adopt some monetary moves. The markets are not expecting a rate cut from the current rate of 0.00%. The bank could announce an extension of the quantitative easing (QE) program beyond its current deadline of March 2017. Currently, the ECB is purchasing €80 billion each month, and has spent a staggering €1.8 trillion in total in QE. Yet, the results have been very disappointing, with inflation nowhere near the ECB target of 2 percent. Still, any hints about further easing from Mario Draghi could push the euro downwards. The situation has become further complicated with the recent Brexit vote, as Britain, the second largest economy in Europe, will be soon be waving goodbye to the EU. Shortly after the shocking Brexit vote, Draghi stated that the impact of Brexit could shave between 0.3 percent and 0.5 percent less over the next three years. We’ll have to wait until September for some hard numbers as the effect of Brexit on the Eurozone and British economies.
Earlier this week, German ZEW Economic Sentiment, shocked the markets by posting a sharp decline in July, the first since October 2014. The reading of -6.8 points was nowhere near the forecast of +8.2 points, and recorded a sharp downturn after a gain of 19.2 points in June. Eurozone ZEW Economic Sentiment followed suit with a reading of -14.7 points, compared to an estimate of +12.3 points. In June, the index boasted a strong gain of 20.2 points. These dismal readings point to deep pessimism on the part of institutional investors and analysts. We’ll get a look at the mood of purchasing managers on Friday, with the release of a host of services and manufacturing PMIs.
Is the Federal Reserve leaning more towards a rate hike in 2016? The markets appear to think so, as the chances of a rate hike this year has been priced in at 47%, up from just 20% at the start of July. This positive sentiment is a result of strong retail sales and housing reports over the past week. Another rate hike will be data-dependent, so if key indicators beat expectations, speculation of a rate hike will increase. We’ll hear from the Fed next Wednesday, with the release of a rate statement.
EUR/USD Fundamentals
Thursday (July 21)
- 11:45 Eurozone Minimum Bid Rate. Estimate 0.00%
- 12:30 ECB Press Conference
- 12:30 US Philly Fed Manufacturing Index. Estimate 5.1
- 12:30 US Unemployment Claims. Estimate 271K
- 13:00 US HPI. Estimate 0.4%
- 14:00 US Existing Home Sales. Estimate 5.48M
- 14:00 US CB Leading Index. Estimate 0.2%
- 14:30 US Natural Gas Storage. Estimate 40B
* Key releases are in bold
*All release times are GMT
EUR/USD for Thursday, July 21, 2016
EUR/USD July 21 at 10:30 GMT
Open: 1.1016 High: 1.1047 Low: 1.1104 Close: 1.1028
EUR/USD Technical
| S1 | S2 | S1 | R1 | R2 | R3 |
| 1.0708 | 1.0821 | 1.0925 | 1.1054 | 1.1150 | 1.1278 |
- EUR/USD has showed limited movement in the Asian and European sessions
- 1.1054 is a weak resistance line
- 1.0925 is providing support
Further levels in both directions:
- Below: 1.0925, 1.0821 and 1.0708
- Above: 1.1054, 1.1150, 1.1278 and 1.1376
- Current range: 1.0925 to 1.1054
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged on Thursday, consistent with a lack of movement from EUR/USD. Short positions have a majority (53%), indicative of trader bias towards EUR/USD breaking out and moving to lower levels.