EUR/USD – Expect a Quiet Day as US Closed for Presidents' Day

Analysis EUR/USD

Published: 2/19/2018 6:17:00 AM

The euro has paused on Monday, after strong losses on Friday. Currently, the pair is trading at 1.2420, up 0.08% on the day. On the release front,  the eurozone current account surplus narrowed to EUR 29.9 billion, short of the estimate of EUR 30.5 billion. There are no US indicators, as US markets are closed for Presidents’ Day. On Tuesday, Germany releases ZEW Economic Sentiment and the eurozone will publish releases Consumer Confidence.

The euro lost close to 1% on Friday, as the US posted sharp housing and consumer confidence reports. Building Permits jumped to 1.40 million in January, up from 1.30 million in December. This easily beat the estimate of 1.29 million. Housing Starts followed suit and improved to 1.33 million in January, up from 1.19 million a month earlier. This was well above the forecast of 1.28 million. There was more positive news from consumer confidence, as UoM Consumer Confidence climbed to 99.9, well above the estimate of 95.4 points. This marked a 4-month high.

The recent volatility in the currency markets has not gone unnoticed by Mario Draghi & Co. Last week, the ECB head expressed confidence that eurozone inflation is moving closer to the Bank’s target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are on the lookout for hints as to whether the ECB will normalize policy and wind up stimulus in September. Any hints from ECB policymakers about a change in policy could have a strong impact on the movement of the euro.

*Key events are in bold

EUR/USD for Monday, February 19, 2018

EUR/USD posted slight gains but retracted in the Asian session. The pair is showing little movement in European trade

EUR/USD ratio is showing slight movement towards long positions. Currently, short positions have a majority (60%), indicative of EUR/USD breaking out and moving to lower ground.

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