EUR/USD – Euro Pushes Towards 1.20, Markets Eye German CPI

EUR/USD continues to gain ground, and has moved higher in the Thursday session, after gains on Wednesday. Currently, EUR/USD is trading at 1.1935, up 0.38% on the day. There are no eurozone data releases on the schedule. In the US, today’s key event is unemployment claims, which is expected to drop to 240 thousand. On Friday, Germany releases Final CPI.

Christmas week is light on eurozone economic releases, so the markets will be paying close attention to German CPI, which will be released on Friday. The indicator rose 0.3% in November, marking a 4-month gain. The markets are expecting a gain of 0.5% for December. In the eurozone, annual average inflation inched up to 1.5% in November, up from 1.4% in October. This marked a multi-year high. Earlier this month, in a nod to stronger economic activity in 2017, the ECB raised its forecasts for growth and inflation for the eurozone from this year through to 2019. Still, inflation remains well below the ECB target of around 2.0%, and ECB policymakers are unlikely to announce an end to their stimulus package until inflation moves closer to the 2.0% target.

US housing numbers continue to beat expectations, as Pending Home Sales surprised the markets with a gain of 0.2%. Last week, Housing Starts came in at 1.30 million, beating the forecast of 1.25 million. On Tuesday, New Home Sales sparkled, with a gain of 733 thousand. This easily beat the estimate of 654 thousand, and was the highest reading since September 2007. On Thursday, the US releases unemployment claims, which is expected to drop to 241 thousand.

With the US economy expanding above 3% in the third quarter, the Federal Reserve remains on track for another rate hike in January. The CME Group has pegged the odds of a January hike at 100%, which could give a boost to the US dollar. If the economy continues its impressive pace of growth above 3%, the Fed could raise rates up to four times in 2018. Despite strong economic conditions, the Federal Reserve’s inflation target of 2.0% remains elusive. Fed Chair Janet Yellen and other FOMC members have said that they expect that the strong labor market will lead to higher inflation. Although this is yet to materialize, of significance to the markets is the commitment of the Fed to press ahead with rate hikes despite low inflation.

EUR/USD Fundamentals

Thursday (December 28)

• 4:00 ECB Economic Bulletin
• Tentative – Italian 10-year Bond Auction
• 8:30 US Unemployment Claims. Estimate 240K
• 8;30 US Goods Trade Balance. Estimate -67.7B
• 8:30 US Preliminary Wholesale Inventories. Estimate 0.4%
• 9:45 US Chicago PMI. Estimate 62.2
• 10:30 US Natural Gas Storage. Estimate -115B
• 11:00 US Crude Oil Inventories. Estimate -3.9M

Friday (December 29)

• All Day – German Preliminary CPI. Estimate 0.5%
• 3:00 Spanish Flash CPI. Estimate 1.5%
• 4:00 Eurozone M3 Money Supply. Estimate 4.9%

*All release times are GMT

*Key events are in bold

EUR/USD for Thursday, December 28, 2017

EUR/USD for December 28 at 4:40 EDT

Open: 1.1889 High: 1.1946 Low: 1.1889 Close: 1.1935

EUR/USD Technical

EUR/USD has posted slight gains in the Asian and European sessions

• 1.1876 has some breathing room in support following gains by EUR/USD on Thursday
• 1.1961 is the next resistance line. It has held firm since late November

Further levels in both directions:

• Below: 1.1876, 1.1777, 1.1657 and 1.1574
• Above: 1.1961, 1.2092 and 1.2221
• Current range: 1.1876 to 1.1961

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Thursday session. Currently, short positions have a majority (63%), 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.