EUR/USD – Euro Edges Higher, Eurozone GDP Matches Estimate

The euro has posted slight gains in the Tuesday session, offsetting the losses we saw on Monday. Currently, EUR/USD is trading at 1.2411, up 0.23% on the day. On the release front, Eurozone Preliminary Flash GDP for the fourth quarter remained unchanged at 0.6%, matching the forecast. Later in the day, the eurozone releases Preliminary CPI for Q4, with the markets braced for a decline of 0.5%. In the US, Consumer Confidence is expected to rise to 123.2 points. As well, President Trump will deliver his State of the Union address before Congress. Wednesday will be busy. Germany releases retail sales and the eurozone will publish CPI Flash Estimate. There are a host of key indicators in the US, led by ADP Nonfarm Employment Change. The Federal Reserve will release a monetary policy statement, with the markets expecting the benchmark rate to remain unchanged at a range between 1.25%-1.50%.

The euro posted strong gains last week, after US Treasury Secretary Robert Mnuchin said that the US had no problem with a weak dollar. ECB policymakers were not pleased with Mnuchin’s statement, and Mario Draghi, without naming Mnuchin, said that such comments amounted to “targeting the exchange rate”. Mnuchin has since backtracked, saying that his words were taken out of context and that the US has a long-term interest in a strong dollar. President Trump added that Mnuchin was misinterpreted, but these attempts at damage control haven’t had much effect, as EUR/USD has traded sideways since the Mnuchin comments.

The markets have become accustomed to GDP releases above 3.0% in the US, so Advance GDP for Q4 was disappointing. The reading of 2.6% fell short of the estimate of 3.0%. The economy grew 2.3% in 2017, compared to 1.6% in 2016. Growth in Q4 was affected by stronger consumer spending, which led to a surge in imports. At the same time, the increase in consumer spending also boosted inflation, as the personal consumption expenditures index, which the Fed prefers to use, rose 1.9% in the fourth quarter, up from 1.3% in Q3. Meanwhile, the US manufacturing sector is booming, as durable goods orders in December hit 2.9%, crushing the estimate of 0.6%. This was the highest gain in six months, and helped make 2017 a banner year. Durable good orders increased 5.8% in 2017, the sharpest expansion since 2011.

Dollar Recovers Awaits Trump First State of the Union

EUR/USD Fundamentals

Tuesday (January 30)

• 1:30 French Flash GDP. Estimate 0.5%. Actual 0.6%
• All Day – German Preliminary CPI. Estimate -0.5%
• 2:45 French Consumer Spending. Estimate +0.4%. Actual -1.2%
• 3:00 Spanish Flash GDP. Estimate 0.7%. Actual 0.7%.
• 5:00 Eurozone Preliminary Flash GDP. Estimate 0.6%. Actual 0.6%
• Tentative – Italian 10-year Bond Auction
• 9:00 US S&P/CS Composite-20 HPI. Estimate 6.3%
• 10:00 US CB Consumer Confidence. Estimate 123.2
• 21:00 President Trump Speaks

Wednesday (January 31)

• 2:00 German Retail Sales. Estimate -0.4%
• 3:55 German Unemployment Change. Estimate -20K
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.3%
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%
• 5:00 Eurozone Unemployment Rate. Estimate 8.7%
• 8:15 US ADP Nonfarm Employment Change. Estimate 191K
• 8:30 US Employment Cost Index. Estimate 0.5%
• 9:45 US Chicago PMI. Estimate 64.3
• 10:00 US Pending Home Sales. Estimate 0.5%
• 14:00 US FOMC Statement
• 14:00 US Federal Funds Rate. Estimate <1.50%

*All release times are GMT

*Key events are in bold

EUR/USD for January 30, 2018

EUR/USD for January 30 at 6:10 EDT

Open: 1.2482 High: 1.2423 Low: 1.2335 Close: 1.2411

EUR/USD Technical

EUR/USD edged lower in the Asian session but has reversed directions and posted gains in European trade

• 1.2357 is providing support
• 1.2481 is the next line of resistance

Further levels in both directions:

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

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Tuesday session. Currently, short positions have a majority (61%), indicative of EUR/USD reversing directions and moving lower.

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.