EUR/USD June 18 – Steady as Markets Eye Fed Statement

It continues to be an uneventful week for EUR/USD, which  is  showing little movement  on Wednesday. In the European session, the pair is trading in the mid-1.35 range.  On the release front,  today’s highlight  is the Federal Reserve Policy Statement. In the Eurozone, the sole event on the schedule is the German 10-year Bond Auction. Here is a quick update on what’s moving the pair.

• EUR/USD  was  quiet in the Asian session,  trading around the 1.3540 line. The pair  had edged higher  in the European  session.
• Current range:  1.3550 to 1.3585.

Further levels in both directions:    

• Below: 1.3550, 1.35, 1.3450, and 1.34
• Above: 1.3585, 1.3650, 1.3677, 1.37, 1.3740, 1.3785,  1.3830, 1.3865 and 1.3905.
• 1.3550  remains a weak support line. The round number of 1.35 is next.
• 1.3585 is an immediate resistance line.  1.3650 is stronger.

 

EUR/USD Fundamentals

• Tentative –    German 10-year Bond Auction.
• 12:30 US Current Account. Estimate -96B.
• 14:30 US Crude Oil Inventories. Estimate -0.6M.
• 18:00 US FOMC Economic Projections.
• 18:00 US FOMC Statement.
• 18:00 US Federal Fund Rate. Estimate <0.25%.
• 18:30 US FOMC Press Conference.

*All times are GMT.

For more events and lines, see the  Euro to dollar  forecast.

 

EUR/USD Sentiment

• US  housing  numbers down, inflation up:  In the US, housing data was a disappointment, as Building Permits dropped to 0.99M, well below the estimate of 1.07M. As well, Housing Starts  dropped to 1.00M, shy of the estimate of 1.04M. On the inflation front, Core CPI moved up modestly, posting a gain of 0.3%. This was the strongest gain we’ve seen since January 2013. CPI followed suit, climbing to an eleven-month high. The index rose to 0.4%, beating the estimate of 0.2%.
• German Economic Sentiment slips: German ZEW  Economic Sentiment, a well-respected indicator, continues to lose ground throughout 2014. The index weakened to 29.8 points, well off the estimate of 35.2 points. This was the worst  reading we’ve seen since November 2012. Eurozone ZEW Economic Sentiment improved in May, climbing to 58.4 points. However, this fell short of the estimate of 59.6. Despite the dismal German release, the euro is holding its own against the US dollar.
• Fed expected to hold course: The US Federal Reserve will issue a policy statement on Wednesday, with the markets expecting another $10 trim to QE, which would reduce the asset purchase program to $35 billion/month.. The big question is when the Fed will raise interest rates, but Fed chair Janet Yellen is unlikely to shed much light on that issue. If, as expected, QE is wound up in 2014, we could see a rate hike in the first half of 2015. However, cuts to QE are dependent on the health of the US economy, which continues to move in the right direction, despite some bumps in the road.
• Eurozone inflation remains weak:  Even though the  ECB has already made its decision, inflation data remains of importance for the next moves. French and Spanish inflation numbers remain weak, and Eurozone CPI remains well below the ECB’s target of 2.0%. A dip below these levels could add pressure on the euro and force the ECB to take further monetary measures at the July policy meeting.
• Euro weighed by  yield differential: The impact of Draghi is still felt on markets: yields in the euro-zone are low and they are beginning to be in contradiction with other regions: the  BOE’s Mark Carney said that UK rates will rise sooner than current expectations and this boosted the pound. EUR/GBP fell below 0.80. On this background, the easing ECB could push the euro below the 1.35 level. We will get the US rate decision next Wednesday.