EUR/USD ended last week with little activity and this trend is continuing on Monday, as the pair trades in the high-1.36 range in the European session. In the Eurozone, German Import Prices posted a slight gain of 0.1%. Today’s highlight out of the US is UoM Consumer Sentiment. The markets are expecting a strong reading for November, with an estimate of 82.9 points.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- EUR/USD was steady in the Asian session, touching a high of 1.3695 and consolidating at 1.3686. The pair is unchanged in the European session.
- Current range: 1.3675 to 1.3710.
- Below: 1.3675, 1.3615, 1.3525, 1.3440, 1.34, 1.3320, 1.3240, 1.3175 and 1.31.
- Above: 1.3710, 1.3800, 1.3832, 1.3940 and 1.4036.
- 1.3710 is the next resistance line. 1.3800 follows.
- On the downside, 1.3675 is under strong pressure. 1.3615 is stronger.
- 7:00 German Import Prices. Exp. 0.4%, Actual 0.1%.
- 13:30 US Core PCE Price Index. Exp. 0.1%.
- 13:30 US Personal Spending. Exp. 0.5%.
- 13:30 US Personal Income. Exp. 0.4%
- 14:00 Belgian NBB Business Climate. Exp. -3.9 points.
- 14:55 US Revised UoM Consumer Sentiment. Exp. 82.9 points.
- 14:55 US Revised UoM Consumer Inflation Expectations.
For more events and lines, see the Euro to dollar forecast.
- US GDP jumps in November: The week ended on a positive note, as US GDP climbed to 4.1% in Q3, compared to 2.6% in the previous quarter. It was the strongest reading since Q1 of 2010. The estimate stood at 3.6%. This excellent figure help push up the dollar, which had already posted sharp gains against the euro following the Fed’s taper announcement.
- US employment numbers disappoint: US employment data looked weak on Thursday. Unemployment Claims jumped to 379 thousand claims last week, up from 368 thousand the week before. This was well above the estimate of 336 thousand. The previous release’s weak numbers were attributed to the holiday season, but two consecutive bad releases will certainly not comfort the markets. There was more bad news to follow. Existing Home Sales posted its third consecutive decline, dropping to 4.90 million compared to 5.12 million in the previous release. The Philly Fed Manufacturing Index rose from 6.5 to 7.0 points, but this was way off the estimate of 10.3 points.
- Fed announces $10 billion taper to QE: There was plenty of drama preceding the Federal Reserve statement on Wednesday, and anyone hoping for exciting news was not left disappointed. The Fed announced that it was tapering its QE program by $10 billion a month, commencing in January. This will reduce the Fed’s asset purchases to $75 billion, comprised of $40 billion in Treasuries and $35 billion in mortgage bonds. The announcement came as somewhat of a surprise, as most analysts had not expected the Fed to take action until early next year. The currency markets reacted sharply to the news, and EUR/USD dropped over one cent.
- Tapering yes, rate hike no: The Federal Reserve was careful to separate tapering expectations from rate hike expectations. Fed chairman Bernard Bernanke stated that interest rates are likely to remain low even after the unemployment rate drops below 6.5%. Previously, the Fed had stated that it would start to consider rate increases when unemployment fell below this level. Bottom line? With the unemployment rate at 7.0%, it could be a while before we see higher rates in the US.
- Senate passes budget agreement: A two-year, bipartisan budget agreement is moving quickly through Congress. The deal was overwhelmingly approved in the House of Representatives last week and the Senate followed suit on Wednesday, passing the measure by a vote of 64-36. The bill will now go the President Obama for his signature, before becoming law. The agreement sets limits on government spending for two years 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 the threat of a shutdown which paralyzed the government in October for 16 days.
- Eurozone inflation continues to lag: The ECB has an inflation target of about 2%, but Eurozone inflation indicators are pointing to numbers well off that mark. Eurozone CPI improved to 0.9% in November, less than half of the ECB’s inflation target. German PPI posted a decline of 0.1%, the fourth decline in five releases. Germany is the Eurozone’s largest economy, and if the region is to shake off weak economic growth and high unemployment, it will need the German locomotive to lead the way.