EUR/USD – Euro dips below 1.14 as German factory orders slide

EUR/USD is showing slight movement in the Wednesday session. Currently, the pair is trading at 1.1395, down 0.08% on the day. On the release front, German Factory Orders declined 1.6%, compared to an estimate of a 0.3% gain. With no major U.S. indicators, the markets will be focusing on Federal Reserve Chair Powell, who will speak at an event in Washington. On Thursday, Germany releases industrial production and the EU publishes its economic forecasts. In the U.S., the key event is unemployment claims.

German numbers continue to stumble, raising concerns about the strength of the eurozone economy. Retail sales ended the year with a whimper, as the December score plummeted 4.3% last week, its sharpest decline in more than 12 years. On the manufacturing front, German manufacturing PMI for January dipped to 49.7, below the 50-point level which separates contraction and expansion. This was the weakest score since October 2014. The dismal news continued on Wednesday, as factory orders fell 1.6%, after a decline of 1.0% in the previous release. Global trade tensions and weakness in the German auto sector continue to weigh on the manufacturing sector. Weakness in manufacturing can be seen across the eurozone, as France and Italy both posted manufacturing PMIs in contraction territory in January.

The eurozone may be experiencing a slowdown, but that hasn’t changed the ECB’s guidance on interest rates. The bank continues to forecast a rate hike in December, but this stance has become increasingly out of sync with market sentiment, which has ruled out a rate hike before mid-2020. With ECB President Mario Draghi due to leave the job in October, policymakers are reluctant to alter current guidance and ‘tie the hands’ of Draghi’s successor. This means that the ECB will cling to its current guidance unless economic conditions significantly deteriorate.

Quiet midweek eyed ahead of May’s Brussels visit

Dollar drives higher

EUR/USD Fundamentals

Wednesday (February 6)

• 2:00 German Factory Orders. Estimate 0.3%. Actual -1.6%
  
• 8:30 US Preliminary Nonfarm Productivity. Estimate 1.7%
• 8:30 US Preliminary Unit Labor Costs. Estimate 1.7%
• 8:30 US Trade Balance. Estimate -54.0B
• 10:30 US Crude Oil Inventories. Estimate 1.3M
• 13:01 US 10-year Bond Auction
• 18:05 US FOMC Member Quarles Speaks
• 19:00 Fed Chair Powell Speaks

Thursday (February 7)

• 2:00 German Industrial Production. Estimate 0.8%
• 4:00 ECB Economic Bulletin
• 5:00 EU Economic Forecasts
• 8:30 US Unemployment Claims. Estimate 220K

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, February 6, 2019

EUR/USD for February 6 at 6:00 EST

Open: 1.1404 High: 1.1409 Low: 1.1380 Close: 1.1395

EUR/USD Technical

EUR/USD has posted small losses in the Asian and European sessions

• 1.1300 is providing support
• 1.1434 is the next resistance line
• Current range: 1.1300 to 1.1434

Further levels in both directions:

• Below: 1.1300, 1.1212 and 1.1120
• Above: 1.1434, 1.1553, 1.1685 and 1.1803

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