EUR/USD Dec. 16 – Higher After Positive German, Eurozone

EUR/USD  has  moved higher in Monday trading, as  the pair  trades in the high-1.37 range. In economic news, German and Eurozone PMIs indicated  expansion, while French PMIs missed their estimates.  Later in the day, ECB President Mario Draghi will speak on monetary policy before a parliamentary committee in Brussels. In the US, today’s highlights include the Empire State Manufacturing Index and Industrial Production.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• EUR/USD  edged higher in the Asian session, consolidating at 1.3751. The pair  is up slightly in  the European session.
• Current range: 1.3710 to 1.3800.

Further levels in both directions:    

• Below: 1.3710, 1.3675, 1.3615, 1.3525, 1.3440, 1.34, 1.3320, 1.3240, 1.3175 and  1.31.
• Above: 1.3800, 1.3832, 1.3940 and 1.4036.
• 1.3710  continues to  provide support.  1.3675 is next.
• 1.3800 is the next line of resistance. 1.3870 follows.

EUR/USD Fundamentals

• 8:00 French Flash Manufacturing PMI. Exp. 49.1, Actual 47.1 points.
• 8:00 French Flash  Services PMI. Exp. 48.9, Actual 47.4 points.
• 8:30  German Flash Manufacturing PMI. Exp. 53.1, Actual 54.2 points.
• 8:30  German Flash Services  PMI. Exp. 55.2, Actual 54.0 points.
• 9:00  Eurozone Flash Manufacturing PMI. Exp. 51.9, Actual 52.7 points.
• 9:00  Eurozone Flash  Services PMI. Exp. 51.5, Actual 51.0 points.
• 9:00 Italian Trade Balance. Exp. 1.24B, Actual 4.07B.
• 10:00  Eurozone Trade Balance. Exp. 15.2B, Actual 14.5B.
• 13:30 US Empire  State Manufacturing Index. Exp. 4.9 points.
• 13:30 US Revised Nonfarm Productivity. Exp. 2.9%.
• 13:30 US Revised Unit Labor Costs. Exp. -1.5%.
• 14:00 ECB President Mario Draghi Speaks.
• 14:00 US Flash Manufacturing PMI. Exp. 54.9 points.
• 14:00 US TIC Long-Term Purchases. Exp. 31.4B.
• 14:15 US Capacity Utilization Rate. Exp. 78.5%.
• 14:15 US Industrial Production. Exp. 0.6%.

*All times are GMT

For more events and lines, see the Euro to dollar forecast.

EUR/USD Sentiment

• Mixed PMIs out of Europe: There was plenty of action to start off the new trading week, as the Eurozone released a host of PMI numbers. Eurozone Service and Manufacturing PMIs remained above 50, which is the separator between expansion and contraction. German Flash Manufacturing PMI climbed to 54.2 points, while the Services PMI missed the estimate, but came in at a respectable 54.0 points. French PMIs were weak, with the Manufacturing PMI dropping to 47.1 and the Services PMI coming in at 47.4 points.   The euro has reacted positively, as it climbs towards the 1.38 line.
• German  inflation declines:  German inflation continues to look weak. On Friday, WPI posted a decline of 0.2%, well below the estimate of 0.4%. The index continues to flounder  and has posted declines for most of 2013. Earlier in the week, CPI, a key inflation index, posted a weak gain of 0.2%. Low  inflation  underscores weak  growth  in  the German economy, which does not bode well for the Eurozone.
• Markets eye Fed Meeting: US employment numbers  have generally been strong, although last week’s  disappointed, posting a nine-week high.   The Fed has said that a stronger employment picture is a prerequisite to tapering, and there is speculation that the Fed could make a move this week, although there’s a greater likelihood that we won’t see a taper until early next year. Still, the Fed policy meeting is the event of the week and will be closely monitored by the markets. Currently, the Fed is purchasing $85 billion in assets every month, and a Fed taper will likely boost the US dollar against the major currencies.
• Budget agreement passes first hurdle:  There was some good news on the fiscal front late last week, as the US House of Representatives easily passed a budget deal. The agreement, which is scheduled to be voted  on by the Senate  this week, removes the risk of a government shutdown and reduces the deficit by a modest $23 billion. Democrats and Republicans both had criticism of the proposal, but there is general agreement in Washington that the compromise reached is a positive step which removes some of the  fiscal uncertainty  we’ve seen in recent months.