EUR/USD Jan. 7 – Rangebound As German Numbers Shine

EUR/USD  is  listless in Tuesday trading, as the pair  trades in the low-1.36 range. In economic news, German data looked sharp, as Retail Sales and Unemployment Change improved in December.  Eurozone CPI Flash Estimate posted a gain of 0.8%, just shy of the estimate. In the  US, ISM  Non-Manufacturing PMI  came in at 53.0 points,  missing the estimate.  As expected, the Senate  confirmed  Janet Yellen  to head the  Federal Reserve,  commencing in February.  Today’s highlight is US Trade Balance.

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

EUR/USD Technical

• EUR/USD  showed little movement in the Asian session,  consolidating at 1.3619. The pair is unchanged in the European  session.

Current range: 1.3615 to 1.3675.

Further levels in both directions:  

• Below:    1.3615, 1.3525, 1.3440, 1.34, 1.3320, 1.3240 and  1.3175.
• Above: 1.3675, 1.3710, 1.3800, 1.3832, 1.3940 and 1.4036.
• 1.3675 is the first line of resistance. 1.3710 follows.
• On the downside, the pair is testing support at 1.3615. There is stronger support at 1.3525.

EUR/USD Fundamentals

• 7:00  German Retail Sales. Exp. 0.5%, actual 1.5%.
• 8:55  German Unemployment Change. Exp. -1K, actual -15K.
• 10:00  Eurozone CPI Flash Estimate. Exp.  0.9%, actual  0.8%.
• 10:00  Eurozone PPI. Exp. -0.1%, Actual -0.1%.
• 13:30 US Trade Balance. Exp. -40.2B.
• 15:00 US IBD/TIPP Economic Optimism. Exp. 45.3 points.

*All times are GMT

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

EUR/USD Sentiment

• German numbers sparkle: Germany started off 2014 with sharp numbers, as Retail Sales improved by 1.5%, reversing a downtrend of two straight declines. This beat the estimate of 0.5%. Unemployment Change was very sharp, declining by 15 thousand, the first decline in five months. The strong numbers are indicative of an improving German economy, the largest in the Eurozone.
• Eurozone inflation remains weak: Eurozone CPI showed more of the same in December, posting a gain of 0.8%. This is well below the ECB inflation target of 2%. The central bank has responded with rate cuts which have lowered the benchmark rate to a record low of 0.25%, but inflation hasn’t risen as hoped. The ECB will meet and announce a rate decision on Thursday.
• Senate Confirms Yellen: As expected, the US Senate confirmed Susan Yellen as  chair of the Federal Reserve by a wide margin on Monday. Yellen becomes the first woman to head the powerful central bank. She has been a strong supporter of outgoing chair Bernard Bernanke, who lowered interest rates and implemented a QE program  in order to  boost  a struggling  US economy. The Fed has now started to trim the $85 billion QE scheme, with a  $10 billion cut as of January. We could see another taper at the next Fed policy meeting in late January. Yellen takes over the helm on February 1, and will chair her first policy meeting in March.
• Spanish streak continues: Spanish data continues to sparkle in 2014.  On Monday, Spanish Services PMI jumped to an impressive 54.2 points, up from 51.2 points the month before. This was well above the estimate of 51.1 points.  Last week, Unemployment Change sparkled,  dropping by 107.6 thousand, crushing the estimate of 24.3  thousand. This was the best reading ever in the month of December. Earlier in the week,  Manufacturing PMI crossed above the 50-point  level, indicating expansion.
• Markets eye US employment releases: Last week’s Unemployment Claims were almost identical to the previous week, coming in at 339 thousand. This was slightly above the estimate of 334 thousand.   The markets will be keeping an eye on the year’s first Non-Farm Payrolls, which will be released later in the week. The NFP can impact the next Fed decision, after 2013 ended with QE tapering. While it was small, the Fed did indeed change policy, and this could have a  significant positive impact on the US dollar. We’ll get a look at some key employment numbers this week, including Unemployment Claims, Non-Farm Payrolls and the Unemployment Rate. Meanwhile, ISM Non-Manufacturing PMI disappointed with a reading of 53.0 points, well off the estimate of 54.6 points.
• Dollar  outlook for  2014: Many analysts see the dollar strengthening in 2014, but the euro is certainly expected to give a fight. Here is one outlook: 2014 – Conditional Dollar Strength.