EUR/USD – Euro Steady on Mixed German Numbers

EUR/USD is unchanged in the Monday session, as the pair trades at 1.0550. On the release front, German reports were mixed. Industrial Production edged up to 0.4%, short of the forecast of 0.7%. Germany’s trade surplus improved to EUR 21.7 billion, above the estimate of EUR 20.8 billion. Eurozone Sentix Investor Confidence surged to 18.2, well above estimate of 12.6. There are no major US releases on the schedule. On Tuesday, the key is event is JOLTS Job Openings, which is expected to climb to 5.59 million.

Low inflation rates in the Eurozone have long been a headache for the ECB, which has slashed interest rates almost to zero in an attempt to kick-start the economy and raise inflation. As we enter 2017, the picture appears somewhat brighter. Inflation indicators showed improvement in the fourth quarter of 2016. CPI Flash Estimate posted a strong gain of 1.1% for December, up from 0.6% a month earlier. The last time the indicator cracked the 1.0% level was in August 2013. Next week, we’ll get a look at Final CPI numbers for Germany and the Eurozone. Although inflation indicators are moving in the right direction, inflation still remains well below the ECB’s target of 2.0%.

The US released key employment numbers on Friday and the markets responded with a thumbs-up, boosting the US dollar. Wages rebounded in December, as Average Hourly Earnings climbed 0.4%, edging above the estimate of 0.3%. This marked a strong turnaround after the November reading of -0.1%. The news was not as bright from Nonfarm Payrolls, which dropped to 156 thousand, well off the estimate of 175 thousand. This marked a 3-month low, but the dollar still posted gains. The unemployment rate edged up to 4.7%, matching the forecast.

The US dollar was broadly lower after the Federal Reserve released the minutes of its December meeting. The minutes were cautious in tone, with Fed policymakers essentially saying that monetary policy in the coming months will be dictated in large part by the economic platform of the incoming Trump administration, which remains unclear. FOMC members expressed concern about higher inflation levels, given the “prospects for more expansionary fiscal policies in the coming years”. This is a clear reference to president-elect Trump’s plans to increase fiscal spending and cut taxes, which would likely result in higher inflation, something the US hasn’t had to deal with in years. Still, policymakers haven’t changed their view that gradual rate hikes remains an appropriate monetary policy. Many analysts are predicting another rate hike in June, but this forecast could easily change, depending on the performance of the US economy in the first half of 2017.

EUR/USD Fundamentals

Monday (January 9)

• 7:00 German Industrial Production. Estimate 0.7%. Actual 0.4%
• 7:00 German Trade Balance. Estimate 20.8B. Actual 21.7B
• 9:00 Italian Monthly Unemployment Rate. Estimate 11.6%. Actual 11.9%
• 9:30 Eurozone Sentix Investor Confidence. Estimate 12.6. Actual 18.2
• 10:00 Eurozone Unemployment Rate. Estimate 9.8%
• 15:00 US Labor Market Conditions Index
• 20:00 US Consumer Credit. Estimate 18.3B

Tuesday (January 10)

• 15:00 US JOLTS Job Openings. Estimate 5.59M

*All release times are GMT

*Key events are in bold

EUR/USD for Monday, January 9, 2017

EUR/USD January 9 at 10:00 GMT

Open: 1.0529 High: 1.0556 Low: 1.0514 Close: 1.0530

EUR/USD Technical

• EUR/USD was flat in the Asian session and has edged higher in European trade
• 1.0506 is providing support
• 1.0616 is the next resistance line

Further levels in both directions:

• Below: 1.0506, 1.0414, 1.0287 and 1.0170
• Above: 1.0616, 1.0708 and 1.0873
• Current range: 1.0506 to 1.0616

OANDA’s Open Positions Ratio

EUR/USD ratio is showing a slight edge in long positions (52%). This is indicative of slight trader bias towards EUR/USD continuing to move 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.