EUR/USD – Euro under pressure, shrugs off strong German trade surplus

EUR/USD continues to post losses this week. In the Tuesday session, the pair is trading at 1.1449, down -0.37% on the day. There are no key eurozone or U.S. events on the schedule. Germany’s trade surplus has climbed to EUR 18.3 billion, well above the estimate of EUR 15.9 billion. On Wednesday, Germany releases the yield on 10-year bonds. The U.S. will publish PPI and the U.S Treasury Currency report, a semi-annual publication.

Traders are awaiting the U.S Treasury’s next currency report, which was last released in April. In that report, the U.S did not name any of its major partners as currency manipulators, but it did criticize China for the “non-market direction” of its economy. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan, in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. The report should be treated as a market-mover.

With the ECB on track to wind up its stimulus program at the end of the year, the markets are focusing on the timing of a rate hike next year. The ECB has stated that it will not raise rates before the “end of the summer”, which many analysts have interpreted as September 2019. However, inflation has climbed significantly in the eurozone, and the ECB could opt to raise interest rates before September in order to curb inflation. Besides inflation, ECB policymakers will have to weigh other factors such as the U.S-China trade war when deciding when to raise interest rates.

Noisy Markets

Will the bond market bloodbath resume?

EUR/USD Fundamentals

Tuesday (October 9)

• 2:00 German Trade Balance. Estimate 15.9B. Actual 18.3B
• 6:00 US NFIB Small Business Index. Estimate 108.9
• Tentative – US IBD/TIPP Economic Optimism. Estimate 54.6
• 21:10 US FOMC Member John Williams Speaks

Wednesday (October 10)

• Tentative – German 10-year Bond Auction
• 8:30 US PPI. Estimate 0.2%
• 8:30 US Core PPI. Estimate 0.2%
• Tentative – US Treasury Currency Report

*All release times are DST

*Key events are in bold

EUR/USD for Tuesday, October 9, 2018

EUR/USD for October 9 at 6:05 DST

Open: 1.1492 High: 1.1503 Low: 1.1464 Close: 1.1449

EUR/USD Technical

EUR/USD showed little movement in the Asian session. The pair has posted losses in European trade

• 1.1434 is providing weak support
• 1.1553 is the next resistance line

Further levels in both directions:

• Below: 1.1434, 1.1300 and 1.1190
• Above: 1.1553, 1.1637, 1.1718 and 1.1840
• Current range: 1.1434 to 1.1553

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