EUR/USD Nov. 29 – Steady Despite Sluggish German Retail

EUR/USD  continues to point upwards and has edged higher in Friday trading. The pair is trading slightly above the 1.36 line in the European session. Eurozone data was a disappointment, as German Retail Sales declined 0.8% in October. French Consumer Spending also dipped, losing 0.2%. Eurozone CPI Flash Estimate and Unemployment Rate will be released later in the day. US markets will be closing early on Friday, and there are no US releases.

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

EUR/USD Technical

• EUR/USD was  steady  in the Asian session. The pair  touched a high of 1.3622 late in the session and consolidated at 1.3606. The pair is unchanged in the European session.
• Current range: 1.3570 to 1.3650.

Further levels in both directions:  

• Below: 1.3570, 1.3500, 1.3440, 1.34, 1.3320, 1.3240, 1.3175, 1.31, 1.3050, 1.3000 and  1.2940.
• Above: 1.3650, 1.3710, 1.3800 and 1.3870.
• 1.3570  continues to provide  weak support. The round number of 1.3500 is next.
• 1.3650 is the next line of resistance. This is followed by 1.3710.

EUR/USD Fundamentals

• 7:00 German Retail Sales. Exp. 0.5%.  Actual -0.8%.
• 7:45 French Consumer Spending. Exp. 0.3%. Actual -0.2%.
• 9:00 Italian Monthly Unemployment Rate. Exp. 12.5%.
• 9:00 Italian  Quarterly Unemployment Rate. Exp. 12.2%.
• 10:00 Eurozone CPI Flash Estimate. Exp. 0.8%.
• 10:00 Eurozone Unemployment Rate. Exp. 12.2%.
• 10:00 Italian Preliminary CPI.  Exp. 0.2%.

*All times are GMT

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

EUR/USD Sentiment

• German Retail Sales falters:  We continue to see mixed numbers out of Germany, the Eurozone’s largest economy. Retail Sales, the most important consumer spending indicator, dropped 0.8% in October, way off the estimate of 0.5%. The indicator has been struggling, as this was the fourth decline in the past five months. This release comes on the heels of a weak German  unemployment claims release on Thursday. On a brighter note, the October Business Climate and Consumer Climate readings were strong, and CPI beat the estimate.
• US Unemployment Claims Drop: For a second straight week, US Unemployment Claims dropped and came in lower than market expectations, although the euro managed to hold its own despite this. The key indicator dropped to an eight-week low of 316 thousand, easily beating the estimate of 331 thousand.  With increasing speculation about a QE taper, employment releases will remain under the market microscope. If employment numbers continue to improve, we can expect the Fed to scale down QE early in 2014, which would likely give a big boost to the US dollar.
• Euro shrugs off Eurozone troubles: We’ve heard plenty about the lack of inflation and growth in the Eurozone, and the ECB is considering further monetary action to shake the economy out of its slumber. Despite all this, the euro continues to look good, and has gained about 250 points against the US dollar in the last two weeks,  as  it trades around the 1.36 level.  However, the euro still is well below the levels we saw in late October, when EUR/USD was trading around 1.38.
• ECB considering deposit rate cut: With inflation remaining very weak despite recent rate cuts, the ECB is considering cutting the deposit rate, which currently stands at 0.0%. However, a move into negative territory would represent unchartered territory and could have negative consequences for the economy. So if the ECB does go ahead and reduce to deposit rate, we could see a “mini cut” of less than 0.25%. The OECD is also expressing concern about the dangers of deflation in the Eurozone and is urging the ECB to consider implementing quantitative easing.  ECB Governing Council member Ardo Hansson confirmed that the ECB could take further steps such as lowering the benchmark or deposit rates.
• Merkel reaches coalition agreement: German Chancellor Angela Merkel’s CDU party has reached an agreement with the Social Democrats to form a coalition, two months after her victory in national elections. This will be her third term in office. Merkel has been opposed to joint liability for Eurozone members in debt, and this policy will likely continue under the new government.