EUR/USD – Euro Trading Sideways on Lack of Eurozone Data

EUR/USD is showing little movement in the Thursday session. Currently, the pair is trading at 1.1817, up 0.07% on the day. On the release front, there are no German or eurozone indicators. In the U.S, there are two key events, which could impact on the movement of EUR/USD. The Philly Fed Manufacturing Index is expected to drop to 21.2, while unemployment claims are forecast to rise to 216 thousand.  On Friday, Germany releases PPI and the eurozone publishes current account and trade balance.

The eurozone economy has performed well in 2018, but inflation has lagged behind and remains well below the ECB inflation target of around 2 percent. German Final CPI for April dropped to a flat 0.0%. Although this matched the forecast, this marked a 3-month low. Eurozone inflation indicators followed a similar trend, losing ground in April. Final CPI edged lower to 1.2%, down from 1.3% a month earlier. Final Core CPI followed a similar trend, dropping from 1.0% to 0.7%. Weak inflation levels could have a significant impact on ECB fiscal policy, as policymakers may have to consider extending its stimulus scheme, which is scheduled to run until September.

Bank of France Governor Francois Villeroy de Galhau raised some eyebrows this week after making hawkish comments about ECB interest rates hikes. Villeroy said that the ECB could soon provide additional guidance on the timing of a rate hike. In its last rate statement, the ECB said that any rate hikes would occur ‘well past’ the wrap-up of the stimulus program, which is slated to end in September. Villeroy stated that ‘well past’ could be a matter of quarters, rather than years. Investors snapped up euros on Monday after Villeroy’s comment, but the euro failed to hold onto these gains and ended the Monday session with small losses.

The U.S economy continues to perform well, but the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%, and the US dollar could continue to make broad gains as we get closer to the June policy meeting.

EUR/USD Fundamentals

Thursday (May 17)

• 4:00 Italian Trade Balance. Estimate 3.74B. Actual 4.53B

• Tentative – Spanish 10-year Bond Auction

• 8:30 US Philly Fed Manufacturing Index. Estimate 21.1

• 8:30 US Unemployment Claims. Estimate 216K

• 10:00 US CB Leading Index. Estimate 0.4%

• 10:30 US Natural Gas Storage. Estimate 105B

Friday (May 18)

• 2:00 German PPI. Estimate 0.3%

• 2:00 German WPI. Estimate 0.2%

• 3:00 US FOMC Member Loretta Mester Speaks

• 4:00 Eurozone Current Account. Estimate 35.1B

• 5:00 Eurozone Trade Balance. Estimate 20.7B

EUR/USD Technical

S1	S2	S1	R1	R2	R3
1.1613	1.1718	1.1809	1.1915	1.2025	1.2092

EUR/USD ticked higher in the Asian session and has been marked by choppy trade in the European session

• 1.1809 is fluid. Currently, it is a weak support line

• 1.1915 is the next resistance line

Further levels in both directions:

• Below: 1.1809, 1.1718, 1.1613 and 1.1448

• Above: 1.1915, 1.2025 and 1.2092

• Current range: 1.1809 to 1.1915