EUR/USD – Euro Edges Lower as Markets Digest Catalonia Vote

The euro has ticked higher in the Friday session. Currently, EUR/USD is trading at 1.1853, down 0.17% since Thursday’s close. On the release front, German GfK Consumer Climate inched up to 10.8, above the estimate of 10.7 points. French Consumer Spending soared 2.2%, well above the forecast of 1.4%. It’s a busy day in the US, with a host of key events. Durable goods reports are expected to improve, but the markets are braced for softer readings from New Home Sales and UoM Consumer Sentiment.

Catalans flocked to the polls in a highly-anticipated election, but the results have shown that little has changed since the region declared independence in October. Although a nationalist party scooped up the most seats, the three pro-independence parties have won 70 seats out of 135, good enough for a slim majority. The vote is a stinging rebuke of Spanish Prime Minister Mariano Rajoy, who has imposed direct rule on the region and was hoping that the election would hurt the independence movement. Spain endured a deep political crisis when Catalonia declared independence, and it appears that more political uncertainty and instability lie ahead for the fourth largest economy in the eurozone.

It has been a great week for President Trump. Republicans lawmakers presented him with an early Christmas present, as both branches of Congress passed Trump’s landmark tax reform bill. One of Trump’s key campaign pledges was tax reform, and the new legislation marks the first overhaul of the tax code since the Reagan administration. There was more good news, as US Final GDP posted a strong gain of 3.2%, just shy of the Preliminary GDP reading of 3.3%. With the US economy posting growth above 3% for another quarter, the Federal Reserve remains on track for another rate hike in January. The CME Group has pegged the odds of a January hike at 98%, and if the economy continues its current pace, the Fed could raise rates up to four times in 2018. Inflation remains a sore point, as the Fed target of 2.0% remains well out of reach. Fed Chair Janet Yellen and other FOMC members have said they expect that the strong labor market will lead to higher inflation, but the Fed has demonstrated that it is willing to press ahead with rate hikes despite low inflation.

EUR/USD Fundamentals

Friday (December 22)

• 2:00 German GfK Consumer Climate. Estimate 10.7. Actual 10.8
• 2:00 German Import Prices. Actual 0.8%
• 2:45 French Consumer Spending. Estimate 1.4%. Actual 2.2%
• 8:30 US Core Durable Goods Orders. Estimate 0.5%
• 8:30 US Core PCE Price Index. Estimate 0.1%
• 8:30 US Durable Goods Orders. Estimate 2.1%
• 8:30 US Personal Spending. Estimate 0.5%
• 8:30 US Personal Income. Estimate 0.4%
• 10:00 US New Home Sales. Estimate 654K
• 10:00 US Revised UoM Consumer Sentiment. Estimate 97.1
• 10:00 US Revised UoM Inflation Expectations

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, December 22, 2017

EUR/USD for December 22 at 5:30 EDT

Open: 1.1873 High: 1.1876 Low: 1.1817 Close: 1.1855

EUR/USD Technical

EUR/USD has showed little movement in the Asian and European sessions

• 1.1777 is providing support
• 1.1876 remains fluid. Currently, it is a weak resistance line

Further levels in both directions:

• Below: 1.1777, 1.1657 and 1.1574
• Above: 1.1876, 1.1961, 1.2092 and 1.2221
• Current range: 1.1777 to 1.1876

OANDA’s Open Positions Ratio

EUR/USD is showing little movement in the Friday session. Currently, short positions have a majority (62%), indicative of EUR/USD continuing to move downwards.

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