Euro steady ahead of CPI, retail sales

The euro started out the week with gains but has taken a pause in Wednesday trading. Currently, EUR/USD is trading at 1.2291, down 0.06% on the day. Earlier in the day, the pair hit a high of 1.2349, its highest level since April 2018.

On Thursday, the markets will be treated to key releases on both sides of the pond, which could shake up the euro. The eurozone releases CPI reports for December. Inflation remains weak due to the difficult economic landscape, and headline CPI is expected to contract for a fifth straight month, with an estimate of -0.2 per cent. The markets are bracing for a soft Retail Sales report for November, with a consensus estimate of -3.4 per cent. We haven’t seen such a low reading since April, so we could see the euro dip if this forecast proves accurate.

Another release that could hurt the euro is Germany Factory Orders, an important gauge of the strength of the manufacturing sector. The forecast for November stands at -0.6%, which would mark the first contraction since the panic days of April, when Covid-19 first appeared on the scene.

In the US, employment data will be in focus for the remainder of the week. On Thursday, we’ll get a look at weekly unemployment claims, which is expected to rise to 798 thousand, up from 787 thousand. On Friday, the US releases nonfarm payrolls, with a low expectation of just 100 thousand new jobs.

US Georgia runoff too close to call

All eyes are on the Georgia runoff for the US Senate, which took place on Tuesday. However, as of Wednesday, no winners have been declared, as the races for both Senate seats are too close to call. The stakes are massive, as the Democrats will effectively gain control of the Senate if they win both races, which would give them control of all three branches of government. This would allow them to pursue their agenda without being hindered by the Republicans. If, however, the latter can win one of the seats, they would maintain control of the Senate, which would force the Democrats to scale down any plans for new taxes and massive stimulus.

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EUR/USD Technical

• EUR/USD is facing weak resistance at 1.2319. The next resistance line is at 1.2341
• There is support at 1.2261, followed by a support line at 1.2225
• The pair crossed above the 10-day MA line earlier in the week

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