EUR/USD – Euro Subdued Ahead Of Eurozone CPI

EUR/USD is showing limited movement in the Wednesday session. Currently, the pair is trading at 1.2365, down 0.04% on the day. On the release front, the focus is on eurozone inflation indicators. Eurozone Final CPI is expected to climb to 1.4%, while Final Core CPI is forecast to remain unchanged at 1.0%. There are no major events in the US, but we’ll hear from FOMC members Williams and Quarles.

The German and eurozone economies have looked solid in 2018, making soft ZEW Economic Sentiment reports all the more surprising. The April reports were much weaker than expected, but investors shrugged off the numbers as risk appetite remains high. The German release of -8.2 points showed pessimism on the part of institutional investors and analysts and marked the weakest reading since November 2012. The eurozone release of 1.9 was the lowest since July 2016. The readings are a major disappointment, as the eurozone economy has been performing well and key indicators have been steady. Investors will be hoping that these ZEW releases are one-time blips and that the May readings will be in line with recent releases.

The ECB remains cautious about winding down its stimulus program, and this stance was underscored in last week’s minutes from the March policy meeting. Policymakers pointed to some concerns which could affect plans to end stimulus, which the ECB has had in place for years in order to boost the economy. These include the tariff spat between the US and China, which ECB policymakers stated would hurt “all countries involved.” As well, there is concern that Britain’s departure from the European Union could cause more economic harm than previously expected. At the same time, the eurozone economy continues to perform well and inflation has been steady. This makes it unlikely that the ECB will extend stimulus, but could opt for a longer exit path. As for interest rate policy, no rate hikes are expected anytime soon. Last week, Commerzbank pushed back its forecast for an ECB interest-rate increase by three months to September 2019.

The recent trade battle between the US and China has been overshadowed by events in Syria, but the threat of further tariffs between the world’s largest two economies could again roil the markets and in turn, send gold prices higher. Another salvo was fired on Tuesday, as China slapped a tariff of some 179% on US sorghum crops, which is a livestock feed. China imports about $1 billion of sorghum annually, and the tariff, if it remains in place, will essentially halt US exports of sorghum to China. The Chinese government has threatened to impose tariffs on US soybean exports, valued at some $12 billion each year. If the US opts to retaliate, the specter of an ugly trade war between the US and China could spook investors and push the US dollar higher.

Familiar Themes For FX With Little Inference, No Real Direction

EUR/USD Fundamentals

Wednesday (April 18)

• 5:00 Eurozone Final CPI. Estimate 1.4%
• 5:00 Eurozone Final Core CPI. Estimate 1.0%
• Tentative – German 10-year Bond Auction
• 10:30 US Crude Oil Inventories. Estimate -0.5M
• 14:00 US Beige Book
• 15:15 US FOMC Member William Dudley Speaks
• 16:15 US FOMC Member Randal Quarles Speaks

Thursday (April 19)

• 4:00 Eurozone Current Account. Estimate 32.3B
• 8:30 US Philly Fed Manufacturing Index. Estimate 20.8
• 8:30 US Unemployment Claims. Estimate 230K

*All release times are DST

*Key events are in bold

EUR/USD for Wednesday, April 18, 2018

EUR/USD for Apr 17 - 19, 2018

EUR/USD for April 18 at 3:50 DST

Open: 1.2369 High: 1.2382 Low: 1.2348 Close: 1.2365

EUR/USD Technical

EUR/USD inched higher in the Asian session. The pair reversed directions and edged lower in European trade

• 1.2319 is providing support
• 1.2460 is the next resistance line

Further levels in both directions:

• Below: 1.2319, 1.2235, 1.2092 and 1.2025
• Above: 1.2460, 1.2581 and 1.2662
• Current range: 1.2319 to 1.2460

OANDA’s Open Positions Ratio

EUR/USD ratio is showing limited movement in the Wednesday session. Currently, short positions have a majority (56%), indicative of EUR/USD breaking out and moving to lower ground.

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