The euro is trading sideways on Monday, after an uneventful week. Currently, the pair is trading at 1.2463, up 0.06% on the day. On the release front, Eurozone and German Services PMIs improved in January. Both readings beat their estimates. Eurozone retail sales declined 1.1%, matching the forecast. Later in the day, ECB President Mario Draghi testifies on the ECB’s Annual Report for 2016 before the European Parliament. In the US, the sole event on the calendar is ISM Non-Manufacturing PMI. The indicator is expected to rise to 56.5 points. On Tuesday, Germany releases Factory Orders and the US publishes JOLTS Job Openings.
With the eurozone economy continuing to perform well, there has been speculation that the ECB could wind up its asset-purchase program (QE) in September and shift to a normative policy, and perhaps raise interest rates. However, Mario Draghi and other ECB members have taken pains to reiterate that the Bank is in no rush to end QE. On Wednesday, executive board member Benoit Coeure joined the chorus, saying that although QE “will not last forever” policymakers were in agreement “that we have to be patient and prudent because we are not yet where we want to be in terms of inflation”. Investors would be well advised to keep a close eye on eurozone and German inflation numbers, as asset purchases could be extended beyond September if inflation remains well below the ECB target of around 2.0%.
There was a changing of the guard at the Federal Reserve on the weekend, as Jerome Powell took over as chair, replacing Janet Yellen. On Friday, Yellen waxed optimistic about the economy, saying that strong growth, a red-hot labor market and increased wage growth would require the Fed to gradually raise interest rates. Powell is expected to continue to Yellen’s policies, so the markets are not expecting any dramatic shifts. However, the massive US tax cut will have a strong impact on the US economy, and the markets will be looking to the Fed for guidance. If the Fed sounds optimistic about the tax reform package, the US dollar could move higher.
Monday (February 5)
- 3:15 Spanish Services PMI. Estimate 55.2. Actual 56.9
- 3:45 Italian Services PMI. Estimate 56.1. Actual 57.7
- 3:50 French Final Services PMI. Estimate 59.3. Actual 59.2
- 3:55 German Services PMI. Estimate 57.0. Actual 57.3
- 4:00 Eurozone Final Services PMI. Estimate 57.6. Actual 58.0
- 4:30 Eurozone Sentix Investor Confidence. Estimate 33.2. Actual 31.9
- 5:00 Eurozone Retail Sales. Estimate -1.1%. Actual -1.1%
- 9:45 Eurozone Final Services. Estimate 53.3
- 10:00 US ISM Non-Manufacturing PMI. Estimate 56.5
- 11:00 ECB President Mario Draghi Speaks
- Tentative – US Loan Officer Survey
Tuesday (February 6)
- 2:00 German Factory Orders. Estimate 0.6%
- 4:00 German Buba President Weidmann Speaks
- 4:10 Eurozone Retail PMI
- 10:00 US JOLTS Jobs Openings. Estimate 5.95M
*All release times are GMT
*Key events are in bold
EUR/USD for February 5, 2018
EUR/USD for February 5 at 6:30 EDT
Open: 1.2456 High: 1.2475 Low: 1.2424 Close: 1.2465
EUR/USD has shown little movement in the Asian and European sessions
- 1.2357 is providing support
- 1.2481 is under pressure in resistance. It could break in the Monday session
Further levels in both directions:
- Below: 1.2357, 1.2286, 1.2200 and 1.1961
- Above: 1.2481, 1.2569 and 1.2677
- Current range: 1.2357 to 1.2481
OANDA’s Open Positions Ratio
EUR/USD ratio is showing little movement in the Monday session. Currently, short positions have a majority (62%), indicative of EUR/USD reversing directions and moving lower.
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