Euro Subdued, U.S. Markets Closed For Memorial Day

The euro was quiet last week, as the euro stayed closed to the 1.12 level. Currently, EUR/USD is trading at 1.1190. On the release front, there are no major eurozone events. ECB President Mario Draghi will testify before the Economic and Monetary Affairs Committee in Brussels. US markets are closed for Memorial Day, so traders can expect the euro to remain subdued during the day. On Tuesday, Germany releases Preliminary CPI, and the highlight in the US is CB Consumer Spending.

The US economy expanded at an annual rate of 1.2%, according to its second estimate for GDP. This was considerably higher than the 0.7% gain which was reported in the first estimate in April. Still, this figure is the lowest in a year, and well of the 2.1% gain in Q4. Business spending remains weak, and although consumer confidence remains at high levels, consumer spending has not kept up, as retail sales was softer than expected in April.

The manufacturing sector has hit some turbulence, with Core Durable Goods Orders posting a decline of 0.4% in April, its third decline in four months. After a shaky first quarter for the US economy, there are no indications as of yet that we’ll see a rebound in the second quarter? Will this lead to the Fed rethinking a June rate hike? The markets don’t think so, as the odds of a 0.25% rate hike have increased to 84%.

At the same time, the likelihood of a rate hike in the second half of 2017 are low. The odds for a September rate hike are just 26%, with the markets unclear on whether the Fed will make further moves this year if inflation remains below the Fed target. Even if soft first quarter data was a blip, the markets (and possibly Fed policymakers) are concerned that President Trump, who is facing congressional investigations over his connections with the Russian government, may not be able to pass his agenda of cutting taxes and reigning in government spending.

The eurozone economy is looking brighter compared to a few months ago, as first quarter numbers have been solid. There were plenty of jitters at the start of the year, with the stunning election victory of Donald Trump, who ran on a protectionist campaign of “America first”. As well, the Brexit vote hung over Europe like a dark cloud, with EU members wondering who would pull out of the club next.

Although Trump and Brexit still remain serious challenges for the EU, fears of a populist wave across the continent have receded, as nationalist parties in the Netherlands and France were handily defeated recent elections. Economic indicators continue to point upwards, as unemployment has dropped and growth is higher. The EU Spring Forecast has forecast Eurozone GDP to rise 1.7% in 2017, and 1.8% in 2018, with growth in the EU expected at 1.9% for both years. Investors have shown their approval by flocking to the euro, which has jumped 6.5% since the start of the year.

Q1 US GDP Revised Up to 1.2%

EUR/USD Fundamentals

Monday (May 29)

  • 4:00 Eurozone M3 Money Supply. Estimate 5.2%. Actual 4.9%
  • 4:00 Eurozone Private Loans. Estimate 2.5%. Actual 2.4%
  • 9:00 ECB President Draghi Speaks

Tuesday (May 30)

  • All Day – German Preliminary CPI. Estimate -0.1%
  • 8:30 US Core PCE Price Index. Estimate 0.1%
  • 8:30 US Personal Spending. Estimate 0.4%
  • 10:00 US CB Consumer Spending. Estimate 120.1

*All release times are EDT

*Key events are in bold

EUR/USD for Monday, May 29, 2017

EUR/USD Chart For May 28-30

EUR/USD Monday, May 29 at 5:55 EDT

Open: 1.1176 High: 1.1189 Low: 1.1161 Close: 1.1187

EUR/USD Technical


EUR/USD inched lower in the Asian session but has recovered these losses in European trade

  • 1.1122 is providing support
  • 1.1242 is the next resistance line

Further levels in both directions:

  • Below: 1.1122, 1.0985 and 1.0873
  • Above: 1.1242, 1.1366, 1.1465 and 1.1534
  • Current range: 1.1122 to 1.1242

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Monday session. Currently, short positions have a majority (67%), indicative of EUR/USD reversing directions and moving lower.

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