EUR/USD – Euro Steady as German, Eurozone Mfg. Reports Show Expansion

EUR/USD has posted slight losses in the Tuesday session. Currently, the pair is trading at 1.0740. On the release front, German and Eurozone Manufacturing PMI both beat their estimates. In the US, today’s highlight is Existing Home Sales, with the markets bracing for a dip in the December reading. On Wednesday, Germany releases Ifo Business Climate. The indicator is expected to edge up to 111.3 points.

Eurozone data continues to point to expansion in the manufacturing sector. German Manufacturing PMI improved to 56.5, above the forecast of 55.5. This marked the highest level of expansion since April 2011. Eurozone Manufacturing PMI echoed its German counterpart, climbing to 55.1, its best reading since March 2011. The picture is also bright on the inflation front. as indicators pointed upwards in December. German PPI edged up to 0.4% and Eurozone Final CPI jumped 1.1%, its strongest showing in over three years. Inflation levels are currently about halfway to the ECB’s target of 2 percent. If the trend continues, we could see the ECB tighten monetary policy later in the year, either by raising interest rates or tapering its QE scheme. At its policy meeting last week, the ECB maintained its ultra-easy monetary policy, keeping interest rates at 0.00%, where they have been pegged since March 2016. The ECB maintained its asset-purchase program (QE), which is scheduled to continue until December 2017, at a pace of EUR 60 billion/mth.

Donald Trump has barely warmed his new chair in the Oval Office, but dramatic change is already afoot. On Monday, Trump signed an executive order formally withdrawing the US from the Trans-Pacific Partnership, a broad trade agreement which the US had signed but not ratified. Trump had promised to leave the TPP during the election, arguing that the deal would hurt American workers. Next stop is NAFTA, which Trump has said he will renegotiate with Canada and Mexico. Trump has taken a tough line on US companies that have moved production outside of the US and has threatened to impose tariffs on companies that move production to Mexico. Predictably, these protectionist measures are raising concerns in the markets that US economic growth could drop if the US takes an isolationist stance towards global trade, and such a stance would likely weigh on the US dollar. US trade partners could choose to retaliate against Trump’s moves, igniting a trade war in which there are no winners. 

EUR/USD Fundamentals

Tuesday (January 24)

• 3:00 French Flash Manufacturing PMI. Estimate 53.4. Actual 53.4
• 3:00 French Flash Services PMI. Estimate 53.2. Actual 53.9
• 3:30 German Flash Manufacturing PMI. Estimate 55.5. Actual 56.5
• 3:30 German Flash Services PMI. Estimate 54.6. Actual 53.2
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 54.8. Actual 55.1
• 4:00 Eurozone Flash Servies PMI. Estimate 53.9. Actual 53.6
• 9:45 US Flash Manufacturing PMI. Estimate 54.6
• 10:00 US Existing Home Sales. Estimate 5.54M
• 10:00 US Richmond Manufacturing Index. Estimate 7

Upcoming Key Releases

Wednesday (January 25)

• 4:00 German Ifo Business Climate. Estimate 111.3

*All release times are EST

*Key events are in bold

EUR/USD for Tuesday, January 24, 2017

EUR/USD January 24 at 5:00 EST

Open: 1.0759 High: 1.0771 Low: 1.0724 Close: 1.0737

EUR/USD Technical

• EUR/USD was flat in the Asian session and has posted slight losses in European trade
• 1.0708 remains a weak support level
• 1.0873 is the next resistance line

Further levels in both directions:

• Below: 1.0708, 1.0616, 1.0506 and 1.0414
• Above: 1.0873, 1.0985 and 1.1114
• Current range: 1.0708 to 1.0873

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Tuesday session. Currently, short positions have a majority (55%), indicative of 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.