EUR/USD started the new week with a dip to lower levels, before stabilizing. The pair is looking for a new direction after suffering a slide in the previous week. With a holiday in the US, trading could turn somewhat more choppy and unexpected before traders important events later in the week.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
EUR/USD Technical
- EUR/USD dropped towards 1.35 but managed to escape and re-challenge the 1.3550 line it lost on Friday.
Current range: 1.3550 to 1.3615.
Further levels in both directions:
- Below: 1.3550, 1.3450, 1.34, 1.3320, 1.3240 and 1.3175.
- Above: 1.3615, 1.3675, 1.3710, 1.3800, 1.3832, 1.3940 and 1.4036.
- 1.3615 is the next resistance line, if the move above 1.3550 is confirmed.
- 1.3550 now switches to support once again.
EUR/USD Fundamentals
- 7:00 German PPI. Exp. +0.2%, actual +0.1%.
- 11:00 German Bundesbank monthly report.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
EUR/USD Sentiment
- Fear of deflation in Europe: The German PPI weakness joins other indicators of low inflation in Europe. While the ECB sees only low inflation and not outright deflation, any further deterioration could push the ECB to set a negative deposit rate as soon as March 2014. This is a primary source of euro vulnerability.
- German strength: Growth seems solid in the euro-zone’s locomotive. PMIs are upbeat and business sentiment is strong. This will be tested with new figures from an important survey. See how to trade the ZEW Economic Sentiment with EUR/USD.
- French recession?: Thursday’s PMI numbers could show once again that the economic situation in France is worsening. While the German economy seems solid and Spain is getting better, it will be hard for the euro-zone to enjoy stability while Italy is struggling and core France is squeezing.
- US consumer still buying: US retail sales numbers painted a mixed picture. Retail sales rose by only 0.2%, meeting forecasts. The up side came from core sales, which jumped by 0.7%, compared to 0.4% the month before. This easily beat the estimate of 0.4%. Also consumer confidence remains on high ground. December is a key month in US shopping.
- Another taper in January?: The dismal Non-Farm Payrolls report may have created some concern about the US employment picture, but it seems to be totally forgotten, after quite a few positive figures, such as the Philly Fed Index and the surging Empire State Mfg. indicator. The Federal Reserve’s path of tapering QE, which it started just this month is predicted to be followed with another $10 billion taper on January 29th. In December, outgoing Fed chair Bernard Bernanke strong hinted that the Fed planned to wind up QE by the end of 2014, reducing the asset-purchase program by increments of $10 billion at each meeting. The Fed next meets for a policy meeting on January 28, and the question is will the Fed reduce QE by another $10 billion, down to $65 billion each month. Most analysts feel that one bad employment report will not affect the taper schedule and we will see another reduction in QE at the next meeting.
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