EUR/USD – Dollar Rally Continues as Euro Dips to 1.04

The euro has welcomed the New Year with losses, as EUR/USD has posted slight losses in the Tuesday session. Currently, the pair is trading slightly above the 1.04 level. Since December 30, the euro has fallen 1.5 percent. On the release front, Germany will release two major indicators – Preliminary CPI and Unemployment Change. The US will publish ISM Manufacturing PMI. On Wednesday, the Eurozone releases the CPI Estimate while the Federal Reserve will publish the minutes of its last policy meeting.

The Federal Reserve will be back on center stage on Wednesday, with the release of the minutes from the December policy meeting, when the Fed finally raised rates for the first time since December 2015. Analysts will be combing through the minutes, looking for clues regarding future monetary policy. The US economy is performing very well, and the markets are hopeful that this continues as Donald Trump takes office. Trump’s economic policies remain sketchy, although he has promised to increase fiscal spending while lowering taxes. If the economy’s positive momentum continues in early 2017, the Fed could be inclined to raise rates another quarter point in order to prevent the economy from overheating. A rate hike would likely lead to broad gains for the US dollar.

The New Year started on a positive note, as manufacturing indicators point to expansion in the Eurozone manufacturing sector. German Manufacturing PMI improved to 55.6, edging above the forecast of 55.5. Eurozone Manufacturing PMI rose to 54.9, matching the forecast. What is particularly encouraging is that the indicator has now risen over four straight months, pointing to stronger growth in the fourth quarter. The Eurozone has been marked by slow but steady growth, as the bloc has managed to withstand this year’s political earthquakes, notably the British vote to leave the European Union and the stunning electoral victory of Donald Trump. GDP growth for 2016 is expected at 1.6%, while the forecast for both 2017 and 2018 stands at 1.5%.

EUR/USD Fundamentals

Tuesday (January 3)

  • All Day – German Preliminary CPI
  • 7:45 French Preliminary CPI. Estimate 0.5%. Actual 0.3%
  • 8:55 German Unemployment Change. Estimate -5K
  • 14:45 US Final Manufacturing PMI. Estimate 54.2
  • 15:00 US ISM Manufacturing PMI. Estimate 53.7
  • 15:00 US Construction Spending. Estimate 0.5%
  • 15:00 US ISM Manufacturing Prices. Estimate 55.6

Wednesday (January 4)

  • 10:00 Eurozone CPI Flash Estimate. Estimate 1.0%
  • 10:00 Eurozone Core CPI Flash Estimate. Estimate 0.8%
  • 19:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

EUR/USD for Tuesday, January 3, 2017

EUR/USD January 3 at 10:40 GMT

Open: 1.0457 High: 1.0490 Low: 1.0395 Close: 1.0414

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.0170 1.0287 1.0414 1.0506 1.0616 1.0708
  • EUR/USD posted slight losses in the Asian session. In European trade, the pair has reversed directions and recorded strong losses
  • 1.0414 is under strong pressure in support
  • 1.0506 is the next resistance line

Further levels in both directions:

  • Below: 1.0414, 1.0287 and 1.0170
  • Above: 1.0506, 1.0616, 1.0708 and 1.0873
  • Current range: 1.0414 to 1.0506

OANDA’s Open Positions Ratio

EUR/USD ratio are almost unchanged in the Tuesday session. Currently,  long positions have a majority (58%), indicative of trader bias towards EUR/USD breaking out and moving upwards.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.