EUR/USD is showing little activity in Wednesday trading, as the markets eagerly await the Federal Reserve’s FOMC Statement later in the day. The pair continues to trade in the mid-1.33 range in European trading. In economic news, US inflation remains very low, as Core CPI posted a gain of just 0.1%. There are no Eurozone releases on Wednesday. In the US, today’s highlight is Building Permits. The markets are not expecting much of a change in the August release. There are no Eurozone releases on Wednesday.
All eyes are on the FOMC Statement, which will be released later on Wednesday, after the Federal Reserve winds up a two-day policy meeting. Fed chief Bernanke will follow up with a press conference. The markets have been speculating about QE tapering for months, and we could see the Fed take action in the upcoming statement. However, there is a stronger likelihood that QE tapering will not begin until later in the year, as US economic releases, particularly employment data, could be stronger. Traders should be prepared for some volatility from EUR/USD once the FOMC Statement is released.
Bernard Bernanke will step down as head of the US Federal Reserve at the end of January, and the race to replace Bernanke has taken a dramatic twist. Former Treasury Secretary Lawrence Summers was considered the leading contender for the prestigious position. Surprisingly, Summers has withdrawn his nomination, leaving Vice Chairman Janet Yellen as the favored candidate. Yellen is considered dovish and may be hesitant when it comes to QE tapering. The dollar responded to the news of Summers’ withdrawal by losing ground against the major currencies.
What’s ailing the US economy? UoM Consumer Sentiment ended a mostly disappointing week on a sour note. The key indicator dropped from 80.0 points in July to 76.8 in August, its lowest level since March. This weak figure comes on the heels of weak US retail sales releases on Thursday. The new week didn’t start out much better, as Empire State Manufacturing Index, an important release, posted another sharp drop in August. The indicator fell from 8.2 points to 6.3 points. This was way off the estimate of 9.2 points. On Tuesday, US inflation releases continue to point to very low inflation. Core CPI, a key event, posted a paltry gain of 0.1%.EUR/USD" title="EUR/USD" src="https://d1-invdn-com.akamaized.net/content/picaacc6fcb7393ced1103d489d8d9c0d59.png" height="300" width="400">
EUR/USD September 18 at 8:45 GMT
EUR/USD 1.3350 H: 1.3364 L: 1.3345EUR/USD Technical" title="EUR/USD Technical" src="https://d1-invdn-com.akamaized.net/content/pica6b1d4e98f959ca2e9e9b9fb1b1e1b58.png" height="154" width="400">
- EUR/USD remains in a narrow range on Wednesday as the proximate support and resistance levels (S1 and R1 above) remain intact.
- The pair continues to face resistance at 1.3410. The next line of resistance is at 1.3476.
- On the downside, there is support at the round number of 1.33. This is followed by stronger support at 1.3162.
- Current range: 1.3300 to 1.3410
Further levels in both directions:
- Below: 1.3300, 1.3162, 1.3100, 1.3050 and 1.3000
- Above: 1.3410, 1.3476, 1.3585 and 1.3649
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged in Wednesday trading. This is reflected in the current movement of the pair, as the pair is showing very little activity. The ratio continues to have a solid majority of short positions, indicative of a strong trader bias towards the US dollar reversing course and making gains at the expense of the euro.
All eyes are on the FOMC Statement and follow-up press conference by Bernard Bernanke later on Wednesday. Whether the Fed announces QE tapering or stands pat, we could see some volatility from EUR/USD. As well, the pair could react to the Building Permits release, a key event.
EUR/USD Fundamentals
- 12:30 US Building Permits. Estimate 0.95M.
- 12:30 US Housing Starts. Estimate 0.93M.
- 14:30 US Crude Oil Inventories. Estimate -1.2M.
- 18:00 US FOMC Economic Projections.
- 18:00 US FOMC Statement.
- 18:00 US Federal Funds Rate. Estimate
- 18:30 US FOMC Press Conference.