EUR/USD had an excellent week that saw more volatility than the prior week with the pair hitting the highest levels in over three years. Is there more to come? Final inflation figures stand out in the week before the ECB decision. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The ECB meeting minutes delivered more action than usual: the document detailing the December meeting included a hint that the ECB may change its guidance about QE, perhaps pre-announcing the end of bond-buying already in the January meeting. This sent the euro higher. Apart from that, investor confidence, retail sales, and industrial production all beat expectations with only a few misses. In the US, the greenback suffered from worries that China will slow or halt buying of US treasuries. The half-denial from the Chinese authorities only partially helped the greenback. US inflation remains not-so-great. The technical behavior of EUR/USD was quite good.Updates:
- Jan 19, 8:01: USD Prone To Further Short Squeeze N-Term; Further EUR Dips A Buy – Credit Agricole: EUR/USD has been floating in on high ground, looking for a new direction after the big break. What’s next? Here...
- Jan 17, 11:06: ECB tries to talk down the euro, but EUR/USD makes higher highs, higher lows: EUR/USD has certainly woken up and went up, far up, perhaps too far for the European Central Bank. The pair...
- Jan 17, 10:32: Has the euro rally reached its limits? Two opinions: EUR/USD temporarily topped 1.23 but retreated as ECB Vice President Vitor Constancio mentioned the exchange rate. Has it reached its...
- Jan 16, 19:06: EUR/USD: Is 1.25 The New 1.20 For ECB? – Nordea: EUR/USD enjoyed the weakness of the US dollar and surged to 1.23, where it took a break. What’s next? What...
- Jan 16, 9:07: EUR/USD: Caution Chasing Longs Here; USD/JPY; Staying Short – TD: EUR/USD has been on a tear, enjoying the ECB minutes, the German coalition, the unimpressive US inflation report, and more....
- Jan 15, 12:07: Oil on a roll and some bitcoin bashing – MM #170: Oil prices are on the move, reaching new highs. We begin with diving into what happened and what’s next before...
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Trade Balance: Monday, 10:00. The euro-zone enjoys a wide trade surplus thanks to Germany’s robust exports. This surplus stood at 19 billion euros in October and could rise now, as we already know that Germany saw a wider surplus in November and despite France’s wider deficit. A surplus of 22.4 billion is on the cards.
- German Final CPI: Tuesday, 7:00. The initial read for December showed a monthly rise of 0.6% in prices in Europe’s largest economy. The final read will likely confirm the initial read.
- CPI (Final): Wednesday, 10:00. The flash estimate of euro-zone CPI showed an OK figure on the headline: 1.4% y/y, in line with expectations. However, core inflation remained at 0.9%, below 1%, for the third consecutive month, showing that underlying inflation is still poor. The final read will likely confirm the initial estimate.
- Jens Weidmann speaks Thursday, 8:!5. The president of the German Bundesbank will make another public appearance. Will he provide a hint about an announcement about the end of QE? We know that he is a hawk, so making dovish remarks could have a bigger impact than hawkish ones. Nevertheless, his words could move markets.
- German PPI: Friday, 10:00. Producer prices missed in November by rising by only 0.1%, breaking a streak of figures coming out ahead of forecasts. Inflation in the pipeline, as reflected by PPI, still seems stronger than CPI. A rise of 0.2% is expected.
- Current Account: Friday, 10:00. Similar to the narrower trade balance figure, the wider current account measure is in a significant surplus. The figure for October was relatively low, with 30.3 billion, a miss on estimates. We could see a higher number in the read for November. A surplus of 31.3 billion is predicted.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar dropped early on, but held the 1.1910 level (mentioned last week) very nicely. It then rebounded, topping 1.20.
Technical lines from top to bottom:
We start from higher ground this time. 1.2725 is high up in the sky but worth mentioning. 1.2480 which protects the 1.25 is next.
1.2280 was a stepping sone on the way down. 1.2215 was the fresh peak in January 2018.
The next levels to watch are 1.2280, which was a stepping stone on the way down.
The 2017 peak of 1.2090 remains important. 1.20 is the obvious round level and also worked as resistance in September.
1.1950 was the high level seen in November and a stepping stone towards 1.20. 1.1860 capped the pair in August and in October while working as support in September.
1.1820 worked as a cushion to the pair in late November and works as weak support. 1.1760 served as a cushion in November and also played a role beforehand.
1.1710 was the high of August 2015 and also worked as support in November. 1.1670 was a swing low in October. and hasn’t worked too well.
I remain bullish on EUR/USD
If the reports from China are correct, diversyfing away from US Treasuries will be beneficial for the euro, the second currency, the euro. In addition, the gradual advance of the ECB towards removing stimulus contrasts the Fed’s dilemma with low inflation.
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