EUR/USD – Euro Shrugs off Sharp German, Euro Confidence Reports

The euro has ticked lower in the Tuesday session. Currently, EUR/USD is trading at 1.2248, down 0.11% on the day. In economic news, German ZEW Economic Sentiment improved to 20.4, beating the estimate of 17.8 points. Eurozone ZEW Economic Sentiment followed the same trend, climbing to 31.8, above the forecast of 29.7 points. In the US, the sole event is the Richmond Manufacturing Index, which is expected to edge lower to 19 points. On Wednesday, Germany and the eurozone release services and manufacturing PMIs.

The US government shutdown is over, after just three days. On Monday, the Senate voted 266-150 to extend funding until February 8. This stopgap measure will enable the government to provide services during that time, but the parties will have to hammer out a longer-term agreement. The Democrats held up a funding bill last week, in order to force the Republicans to the table over illegal immigration. The Republicans have promised to hold a vote on this issue, but many Democratic lawmakers remain skeptical that President Trump and the Republicans will deal in good faith over immigration.

The ECB holds a policy meeting on Thursday, and traders should not expect any dramatics at the first policy meeting of 2018. The Bank is expected to retain its pledge to continue buying bonds under its asset-purchase program (QE). The ECB has trimmed QE from EUR 60 billion to 3o billion/mth, but is likely to hold interest rates for 3-6 months after that. Still, ECB policymakers have hinted that the Bank could wind up QE in September, and this pushed the euro higher in recent weeks. If ECB President Mario Draghi hints at an end to QE, the euro will likely gain ground. Draghi may prefer to keep a low profile until March, after policymakers have had a chance to review updated economic forecasts.

Central Banks Dictate FX Moves while Stocks Rock

EUR/USD Fundamentals

Tuesday (January 23)

• 5:00 German ZEW Economic Sentiment. Estimate 17.8. Actual 20.4
• 5:00 Eurozone ZEW Economic Sentiment. Estimate 29.7. Actual 31.8
• All Day – ECOFIN Meetings
• 10:00 Eurozone Consumer Confidence. Estimate 1
• 10:00 US Richmond Manufacturing Index. Estimate 19

Wednesday (January 24)

• 3:30 German Flash Manufacturing PMI. Estimate 63.2
• 3:30 German Flash Services PMI. Estimate 55.6
• 3:30 Eurozone Flash Manufacturing PMI. Estimate 60.4
• 3:30 Eurozone Flash Services PMI. Estimate 56.5
• 9:00 US HPI. Estimate 0.4%
• 9:45 US Flash Manufacturing PMI.  Estimate 55.2
• 9:45 US Flash Services PMI. Estimate 54.5
• 10:00 US Existing Home Sales. Estimate 5.72M
• 10:30 US Crude Oil Inventories

*All release times are GMT

*Key events are in bold

EUR/USD for January 23, 2018

EUR/USD for January 23 at 6:45 EDT

Open: 1.2261 High: 1.2276 Low: 1.2223 Close: 1.2247

EUR/USD Technical

EUR/USD showed little movement in the Asian session and has ticked lower in European trade

• 1.2200 is providing support
• 1.2286 is a weak resistance line

Further levels in both directions:

• Below: 1.2200, 1.1961, 1.1876 and 1.1777
• Above: 1.2286, 1.2357 and 1.2481
• Current range: 1.2200 to 1.2286

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Tuesday session. Currently, short positions have a majority (64%), indicative of EUR/USD continuing to move to lower ground.

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