Euro Hits 4-Week Lows As Upbeat Yellen Says Rate Hike Coming

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Includes: FXE, UDN, UUP
by: Dean Popplewell

By Kenny Fisher

EUR/USD has lost ground in Wednesday, as the pair trades at 1.0550. On the release front, Eurozone Trade Balance jumped to EUR 24.5B, beating the estimate of EUR 22.5B. It’s a busy day in the US, which will release retail sales and CPI reports, and Yellen will continue her testimony about the semiannual Monetary Policy Report before Congress. On Thursday, the US releases three key events – Building Permits, Philly Fed Manufacturing Index and unemployment claims.

The euro continues to head lower, as EUR/USD has dropped 2.3 percent since February 3. The euro continued to lose ground following testimony from an upbeat Janet Yellen. The Fed chair testified before a Senate committee on Tuesday, and was surprisingly upfront about monetary policy, stating that she expected that the Fed would raise rates in the near future. Yellen stated that “waiting too long to remove accommodation would be unwise”, referring to the re-hot labor market and expectations that inflation would reach the Fed’s target of 2 percent. Will the Fed opt to raise rates in March or in June? The markets will be looking for clues on the timing of a move, as Yellen continues her testimony on Thursday before the House Financial Services Committee.

The Eurozone has been showing signs of recovery, as growth and inflation numbers are higher. This is good news for the ECB, which can now focus on easing monetary policy. If the ECB feels that the economy will continue to march in the right direction, the bank could taper its asset-purchase program or raise interest rates. ECB head Mario Draghi will likely remain cautious, with Brexit and elections in France and Germany high on the agenda. Still, if the eurozone economy continues to grow and inflation levels move higher, we could see the ECB change its monetary stance later in the year. The ECB hold its next policy meeting on March 9, and if eurozone numbers continue to head upwards, there will be pressure to tighten monetary policy.

EUR/USD Fundamentals

Wednesday (February 15)

  • 10:00 Eurozone Trade Balance. Estimate 22.5B. Actual 24.5B
  • 13:30 US CPI. Estimate 0.3%
  • 13:30 US Core CPI. Estimate 0.2%
  • 13:30 US Core Retail Sales. Estimate 0.4%
  • 13:30 US Retail Sales. Estimate 0.1%
  • 13:30 US Empire State Manufacturing Index. Estimate 7.2
  • 14:15 US Capacity Utilization Rate. Estimate 75.6%
  • 14:15 US Industrial Production. Estimate 0.1%
  • 15:00 US Fed Chair Janet Yellen Speech
  • 15:00 US Business Inventories. Estimate 0.5%
  • 15:00 US NAHB Housing Market Index. Estimate 68 points
  • 15:30 US Crude Oil Inventories. Estimate 3.7M
  • 17:45 US FOMC Member Patrick Harker Speaks
  • 21:00 US TIC Long-Term Purchases. Estimate 191.1B

Thursday (February 16)

  • 12:30 ECB Monetary Policy Meeting Accounts
  • 13:30 US Building Permits. Estimate 1.23M
  • 13:30 US Philly Fed Manufacturing Index. Estimate 18.5 points
  • 13:30 US Unemployment Claims. Estimate 243K

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, February 15, 2017

EUR/USD February 15 at 6:05 EST

Open: 1.0578 High: 1.0586 Low: 1.0542 Close: 1.0547

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0333 1.0414 1.0506 1.0616 1.0708 1.0873

EUR/USD showed little movement in the Asian session. The pair has posted slight losses in European trade

  • 1.0506 is a weak support level
  • 1.0616 is the next resistance line

Further levels in both directions:

  • Below: 1.0506, 1.0414 and 1.0333
  • Above: 1.0616, 1.0708, 1.0873 and 1.0985
  • Current range: 1.0506 to 1.0616

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Wednesday session. Currently, long positions have a slight majority (53%), indicative of slight trader bias towards the euro reversing directions and moving higher.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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