EUR/USD – Euro Edges Lower as German Industrial Production Contracts

The euro has edged downwards on Wednesday. Currently, the pair is trading at 1.2343, down 0.27% on the day. On the release front, German Industrial Production declined 0.6%, close to the estimate of -0.7%. This marked the third decline in four months. There are no key releases out of the US. On Thursday, Germany releases Trade Balance and the US publishes unemployment claims.

It’s been a volatile week on the stock markets, with the Dow Jones posting its biggest one-day loss on Monday. The markets were back in green territory on Tuesday. A key factor in the stock market slide was strong employment numbers on Friday, as nonfarm payrolls and wage growth reports beat their estimates. Investors shied away from the stock markets, concerned that the sharp data could lead to higher inflation, which in turn would result in more rate hikes this year. Higher interest rates make the dollar more attractive for investors, at the expense of the stock markets.

The Janet Yellen era is over at the Federal Reserve. On the weekend, Jerome Powell took over as chair, replacing Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive US tax cut will have a strong impact on the US economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the US dollar could move higher.

US Secretary of Treasury Says He is Closely Following Financial Markets

EUR/USD Fundamentals

Wednesday (February 7)

• 2:00 German Industrial Production. Estimate -0.7%. Actual -0.6%
• 2:45 French Trade Balance. Estimate -4.8B. Actual -3.5B
• 4:03 Italian Retail Sales. Estimate -0.1%. Actual -0.3%
• 5:33 German 10-year Bond Auction. Actual 0.69%
• 6:30 EU Economic Forecasts
• 8:30 US Crude Oil Inventories. Estimate 3.2M
• 13:01 US 10-year Bond Auction
• 15:00 US Consumer Credit. Estimate 19.9B
• 17:20 US FOMC Member John Williams Speaks

Thursday (February 8)

• 2:00 German Trade Balance. Estimate 20.4B
• 3:45 German Buba President Weidmann Speaks
• 8:30 US Unemployment Claims. Estimate 236K

*All release times are GMT

*Key events are in bold

EUR/USD for February 7, 2018

EUR/USD for February 7 at 6:35 EDT

Open: 1.2376 High: 1.2406 Low: 1.2337 Close: 1.2343

EUR/USD Technical

EUR/USD ticked higher in the Asian session and is moving higher in European trade

• 1.2357 is providing support
• 1.2481 has some breathing room in resistance

Further levels in both directions:

• Below: 1.2286, 1.2200, 1.2092 and 1.1961
• Above: 1.2357, 1.2481, 1.2569 and 1.2677
• Current range: 1.2286 to 1.2357

OANDA’s Open Positions Ratio

EUR/USD ratio is showing gains towards short positions. Currently, short positions have a majority (65%), indicative of EUR/USD continuing to move lower.

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