EUR/USD – Euro in holding pattern ahead of Fed announcement

EUR/USD is steady in the Wednesday session. Currently, the pair is trading at 1.1771, up 0.03% on the day. On the release front, there are no eurozone or German events. In the U.S, the focus is on the Federal Reserve, which is virtually certain to raise the benchmark rate to a range between 2.00% and 2.25%. On Thursday, there are key indicators on both sides of the pond. Germany releases Preliminary CPI, while the U.S will publish Final GDP and durable goods orders.

All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points at the conclusion of its policy meeting on Wednesday. What will be the tone of the rate statement? The U.S economy is in excellent shape, with GDP for Q2 expected at 4.2%, and unemployment hovering below 4 percent. However, the escalating global trade war has raised concerns that it could cool down global economic growth and hurt the U.S economy as well. Still, another rate hike in December is pegged at 78%, according to the CME, and some experts are predicting up to four rate hikes in 2019.

The euro briefly pushed past the 1.18 line on Monday. This followed hawkish remarks from ECB President Mario Draghi, who was testifying before the European Parliament Economic and Monetary Affairs Committee. Draghi said there had been a “relatively vigorous pick-up in underlying inflation”. With regard to the ECB’s forward guidance, Draghi said that the ‘”through the summer of 2019″ was a timeline in which conditions warrant a first rate increase. This means that the September meeting will be a live meeting, with many analysts predicting a rate hike in December.

Trade tensions have escalated this week, with the U.S and China slapping tariffs on each other. On Monday, the U.S imposed tariffs on some $200 billion worth of Chinese goods, while China responded with tariffs of $60 billion on U.S products. There may be more headwinds ahead, as China sharply attacked the U.S, saying it had plunged “a knife to China’s neck” with the new tariffs. The Chinese have canceled trade talks with the Trump administration, and no new talks are likely to be held until the mood improves between the world’s two largest economies. Previous rounds of tariffs between the two economic giants have boosted the U.S dollar, but so far, investors have reacted calmly and have not dumped their euro assets in favor of the greenback.

 

EUR/USD Fundamentals

Wednesday (September 26)

• 10:00 US New Home Sales. Estimate 630K

• 10:30 US Crude Oil Inventories. Actual -0.7M

• 14:00 US FOMC Economic Projections

• 14:00 US FOMC Statement

• 14:00 US Federal Funds Rate. Estimate <2.25%

• 14:30 FOMC Press Conference

Thursday (September 27)

• 2:00 German GfK Consumer Climate. Estimate 10.6

• All Day – German Preliminary CPI. Estimate 0.1%

• 8:30 US Core Durable Goods Orders. Estimate 0.4%

• 8:30 US Final GDP. Estimate 4.2%

• 8:30 US Durable Goods Orders. Estimate 1.9%

• 9:30 ECB President Draghi Speaks

• 16:30 US Fed Chair Powell Speaks

EUR/USD Technical

S1	S2	S1	R1	R2	R3
1.1553	1.1637	1.1718	1.1840	1.1961	1.2055

 

EUR/USD was mostly flat in the Asian session. The pair is steady in European trade

• 1.1718 is providing support

• 1.1840 is the next resistance line

Further levels in both directions:

• Below: 1.1718, 1.1637, 1.1553 and 1.1434

• Above: 1.1840, 1.1961 and 1.2055

• Current range: 1.1718 to 1.1840