EUR/USD – Euro Dips as German Retail Slumps

The euro has posted small losses in the Thursday session. Currently, EUR/USD is trading at 1.1819, down 0.25% on the day. On the release front, German Retail Sales declined 1.2%, well off the estimate of 0.3%. German unemployment change declined by 18 thousand, better than the estimate of a drop of 10 thousand. Eurozone CPI Flash Estimate edged up to 1.5%, but this was shy of the forecast of 1.6%. In the US, there are two key events – Personal Spending is expected to dip to 0.2%, and unemployment claims is forecast to edge up to 241 thousand. On Friday, manufacturing indicators will be in focus, as Germany, the eurozone and the US release manufacturing PMI reports.

German retail sales remain problematic, and posted a sharp decline of 1.2% in October. This marked the third decline in four months. Germany’s economy is solid and the labor market is strong, so why isn’t the German consumer spending? Strong economic conditions have not translated into higher wages for a large segment of the labor force, and low unemployment numbers have masked the problem of underemployment, ,which of course means lower wages for workers who can’t find full-time work. The lack of inflation in Germany is apparent in the eurozone as well, as inflation levels remain below the ECB’s inflation target of around 2 percent.

There was more good news for the US economy on Wednesday. Preliminary GDP for the third quarter posted a sharp 3.3%, as expected. This was higher than the initial estimate of 3.0% and marked the fastest growth rate since Q3 of 2014. This was particularly impressive, as the southern US was battered by major hurricanes. Although consumer consumption was softened in the third quarter, business spending improved. The rosy picture of the US economy was summarized by Fed Chair Yellen on Wednesday, who said that the expansion was broad-based, across sectors of the economy.

Jerome Powell, who takes over as Fed chair in February, testified before the Senate Banking Committee on Tuesday. Powell said that he favored tailoring regulations for small banks, leaving the toughest regulations for the big players. Powell was cautious and diplomatic during the hearing, saying that the case is building for a December rate hike, and refused to express an opinion on the Trump tax bill. Powell will replace Janet Yellen, and is widely expected to continue Yellen’s monetary stance of small, gradual rate hikes. Fed policymakers have differing views on what to do about inflation, which remains at low levels. Some members have proposed that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

EUR/USD Fundamentals

Thursday (November 30)

• 2:00 German Retail Sales. Estimate +0.3%. Actual -1.2%
• 2:45 French Preliminary CPI. Estimate 0.1%. Actual 0.1%
• 3:55 German Unemployment Change. Estimate -10K. Actual -18K
• 4:00 Italian Monthly Unemployment Rate. Estimate 11.1%. Actual 11.1%
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.6%. Actual 1.5%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 0.9%
• 5:00 Italian Preliminary CPI. Estimate +0.1%. Actual -0.2%
• 5:00 Eurozone Unemployment Rate. Estimate 8.9%. Actual 8.8%
• 8:30 US Unemployment Claims. Estimate 241K
• 8:30 US Core PCE Price Index. Estimate 0.2%
• 8:30 US Personal Spending. Estimate 0.2%
• 9:45 US Chicago PMI. Estimate 62.2
• 10:30 US Natural Gas Storage. Estimate -37B
• 12:30 US FOMC Member Randal Quarles Speaks
• 13:00 US FOMC Member Robert Kaplan Speaks

Friday (December 1)

• 3:55 German Final Manufacturing PMI. Estimate 62.5
• 4:00 Eurozone Final Manufacturing PMI. Estimate 60.0
• 10:00 US ISM Manufacturing PMI. Estimate 58.4

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, November 30, 2017

EUR/USD for November 30 at 5:00 EDT

Open: 1.1848 High: 1.1876 Low: 1.1809 Close: 1.1819

EUR/USD Technical

EUR/USD edged higher in the Asian session but has retracted in European trade

• 1.1777 is providing support
• 1.1876 was tested earlier in resistance and is a weak line

Further levels in both directions:

• Below: 1.1777, 1.1657 and 1.1574
• Above: 1.1876, 1.1961, 1.2092 and 1.2193
• Current range: 1.1777 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD is unchanged in the Thursday session. Currently, short positions have a majority (59%), indicative of EUR/USD reversing directions and moving downwards.

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.