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EUR/USD – Euro Rally Pauses, German Inflation Numbers Mixed

The euro is steady in the Tuesday session. Currently, EUR/USD is trading at 1.2255, down 0.07% on the day. In economic news, Germany released inflation figures. Final CPI improved to 0.6%, matching the forecast. WPI declined 0.3%, missing the estimate of +0.3%. In the US, the sole event on the schedule is the Empire State Manufacturing Index. The indicator is expected to climb to 18.4 points. On Wednesday, the eurozone releases Final CPI, and the US will publish two industrial reports.

The euro has impressed with its recent rally, climbing 2.4% since January 11. There are two key factors behind the upward trend. First, the ECB minutes from the December meeting were hawkish, leading to speculation that the ECB could wind up its asset purchase program in September. In the minutes, policymakers said that risks to the current outlook were to the upside, which could necessitate a gradual shift in guidance in the next few months. As for the eurozone, the minutes stated that the economy was displaying “continued robust and increasingly self-sustaining economic expansion”. Policymakers have echoed the sentiment that tighter policy could be on the way. On Monday, ECB Governing Council member Ardo Hansson said if the economy and inflation develop as expected, the ECB could wind up the asset purchase program in one shot after September. The second factor is major progress in coalition negotiations in Germany. There was a report on Friday that Angela Merkel’s conservative bloc and the Social Democrats have agreed on a coalition draft. This ends months of political uncertainty, which has eroded Merkel’s standing and also sidelined Germany on key issues such as Brexit and political reform in the eurozone. Still, the talks are only in the preliminary stage, and further negotiations will take at least several weeks before it is clear that the talks have been successful.

The dollar lost ground on Friday, as US consumer data for December was lukewarm. CPI slowed to 0.1%, down from 0.4% a month earlier. Core CPI was stronger, improving to 0.3%. Both indicators were within expectations, but pointed to weak inflation levels. On the bright side, consumer spending remained strong. December retail sales, buoyed by Christmas shopping, were up 5.4% compared to a year ago. Although investors were not impressed with the December data, as the euro rally continued, the spending numbers point to a strong finish for the US economy in 2017.

Euro should remain bid on dips [1]

EUR/USD Fundamentals

Tuesday (January 16)

Wednesday (January 17)

*All release times are GMT

*Key events are in bold

EUR/USD for Tuesday, January 16, 2018

EUR/USD for January 16 at 4:00 EDT

Open: 1.2263 High: 1.2284 Low: 1.2216 Close: 1.2233

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1876 1.1961 1.2200 1.2286 1.2357 1.2481

EUR/USD was flat in the Asian session. The pair has edged lower in European trade

Further levels in both directions:

OANDA’s Open Positions Ratio

EUR/USD ratio is showing limited movement in the Tuesday session. Currently, short positions have a majority (66%), indicative of EUR/USD reversing directions and moving to higher ground.

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 [5]

Market Analyst at OANDA [6]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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