EUR/USD has posted losses in Wednesday trading, as the euro trades in the low-1.36 range in the European session. The losses have erased most of the gains that we saw at the start of the week. Eurozone Trade Balance improved to 16.0 billion euros in December, but this was short of the estimate of 16.7 billion. Over in the US, today’s key event is Core PPI. As well, we’ll get a look at the Empire State Manufacturing Index. On Tuesday, US retail numbers were a mix, as Core Retail Sales beat the estimate while Retail Sales weakened.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- EUR/USD weakened in the Asian session, consolidating at 1.3644. The pair has edged lower early in the European session.
Current range: 1.3615 to 1.3675.
- Below: 1.3615, 1.3550, 1.3450, 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, 1.3615 is under pressure. 1.3550 is next.
- 10:00 Eurozone Trade Balance. Exp. 16.7B. Actual 16.0B.
- 13:30 US PPI. Exp. 0.5%.
- 13:30 US Core PPI. Exp. 0.1%.
- 13:30 US Empire State Manufacturing Index. Exp. 3.2 points.
- 15:30 US Crude Oil Inventories.
- 19:00 US Beige Book.
*All times are GMT
For more events and lines, see the Euro to dollar forecast.
- US retail numbers in all directions: US retail sales numbers painted a mixed picture on Tuesday. Retail Sales dropped sharply to 0.2%, down from 0.7% in November. However, this figure matched the forecast. Core Retail Sales took the opposite route, jumping to 0.7%, compared to 0.4% the month before. This easily beat the estimate of 0.4%. Retail sales are an important gauge of consumer spending, and these numbers will have to improve if the recovery is to pick up speed.
- Non-Farm Payrolls take a hit: US employment data had a promising start in 2014, but Friday’s Non-Farm Payrolls was a disaster, posting its lowest gain since May 2012. The key employment indicator dropped to just 74 thousand, down from 203 thousand a month earlier. This was nowhere near the estimate of 196 thousand. Although the unemployment rate dropped to 6.7%, this was due to a drop in the participation rate. The participation rate dropped to 62.8%, its lowest since 1978. This figure points to a worrying trend of a jobless US recovery.
- Taper likely to continue despite weak NFP: Last week’s dismal Non-Farm Payrolls report may create some concern in the markets, but is unlikely to change the Federal Reserve’s path of tapering QE, which it started just this month. 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.
- Steady course for ECB: The first ECB rate announcement of 2014 was a non-event, as the central bank held the benchmark rate at a record low of 0.25% last week. Mario Draghi’s press conference did not make waves and move the currency markets, as has often been the case in the past. Draghi said that monetary policy will remain accommodative for as long as is needed to help the Eurozone economy recover, and that interest rates will likely remain at present or lower levels for the foreseeable future. If growth and inflation indicators continue to look weak, the ECB may have to take action at its next meeting in February.