EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
In the eurozone, the manufacturing sector is in good shape. The German and eurozone PMIs were well into expansionary territory, with readings of 58.3 and 55.2, respectively. France, Spain and Italy showed lower readings but still showed expansion, with readings above the neutral 50 level. The services sector is in weak shape, with readings across the eurozone below 50, which points to contraction.
German retail sales posted a strong gain of 1.9%, crushing the forecast of -2.0%. Inflation accelerated to 0.5%, up from -0.8% beforehand. This marked a 6-month high. However, the eurozone figure of -6.1% showed a sharp drop in consumer spending. Inflation continues to struggle in the eurozone, as CPI came in at -0.3%, marking a fifth straight decline.
In the US, ISM PMIs reports pointed to accelerated expansion in December. Manufacturing PMI improved to 60.7, up from 57.5 beforehand. This beat expectations and was the highest reading since August 2018. Services PMI climbed to 57.2, up from 55.9 beforehand. This exceeded the estimate of 54.5 points.
Nonfarm payrolls was a disaster, with a sharp loss of 140 thousand. The consensus estimate called for a gain of 60 thousand. There was better news from wage growth, which jumped 0.8%, up from 0.3% a month earlier. This was the strongest gain since April.
- Sentix Investor Confidence: Monday, 9:30. Investor confidence has been mired in negative territory for the past 10 months, pointing to prolonged pessimism over economic conditions in the Eurozone. However, analysts are expecting a gain in January, with an estimate of 2.0 points.
- Industrial Production: Wednesday, 10:00. This manufacturing indicator jumped to 2.1% in October but is expected to slow to just 0.3% in November.
- ECB Monetary Policy Meeting Accounts: Thursday, 12:30. The accounts provide details of the ECB’s most recent policy meeting. Investors will be looking for any hints regarding future monetary policy and possible easing measures in the new year.
- French CPI: Friday, 7:45. Inflation in the eurozone’s second-largest economy remains soft. The forecast for December stands at 0.2%, after an identical reading last month.
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EUR/USD Technical analysis
Technical lines from top to bottom:
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1.2478 was last tested in resistance in February 2018.
1.2328 is next.
1.2224 has held in resistance since April 2018. It is an immediate resistance line.
1.2156 is the first line of support.
1.2074 is next.
1.1970 (mentioned last week) has held in support since early December.
1.1844 is the final support line for now.
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I am bearish on EUR/USD
The US dollar has been on the defensive and with the Democrats now in control of all three branches of the federal government, we’re likely to see further easing and stimulus, which could weigh on the greenback.
Further reading:
- EUR/USD forecast – for everything related to the euro.
- USD/JPY forecast – projections for dollar/yen
- AUD/USD forecast – predictions for the Aussie dollar.
- USD/CAD forecast – Canadian dollar analysis
- Forex weekly forecast – Outlook for the major events of the week.
Safe trading!
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