EUR/USD continues to trade sideways this week. In the Tuesday session, the pair is trading at 1.2310 up 0.07% on the day. After a quiet start to the week, there are a host of Eurozone indicators. German Retail Sales was unexpectedly soft, with a decline of 0.7%. This reading was well off the estimate of +0.7% and marked the fourth decline in five months. On the manufacturing front, German and eurozone manufacturing PMIs softened in March, although both indicators were within expectations and continued to point to expansion. There are no major US events on the schedule. On Wednesday, the eurozone releases CPI reports and the unemployment rate. The US will publish ADP payrolls and the ISM Non-Manufacturing PMI.
Britain and EU negotiators were all smiles in March, with the announcement that the two sides had agreed on a transition period for Brexit. This period will take effect at the end of March 2019, when Britain leaves the European Union. The transition phase will last until December 2020, and is meant to serve as a “cushion” to allow businesses to adjust to Britain’s departure. Broadly speaking, EU rules will still apply to the UK, but Britain will no longer have a seat at the table with regards to EU decision-making. However, according to a report in the Times newspaper on Tuesday, EU regulators have warned UK banks operating on the Continent not to rely on the transition deal, and to prepare for a “hard Brexit”, in which the UK would simply depart the EU without any agreement. This position is in stark contrast to that of the Bank of England, which has embraced the transition agreement. The status of financial services in the post-Brexit era remains a key sticking point between the sides, and the stakes are very high, as Paris and Frankfurt are hoping to lure thousands of financial jobs away from the City of London.
The tariff battles have continued this week, with China firing the latest shot. On Monday, China responded to recent US tariffs, imposing its own duties on a range of US goods, including frozen pork and wines. This move is bound to escalate tensions between the two economic giants and has raised fears that a new global trade war could be underway. If the tit-for-tat measures continue, both the US and Chinese economies could suffer, which could lead to a global slowdown. Gold is sensitive to geopolitical crisis, as investors tend to snap up safe-haven assets such as gold during times of uncertainty. If tensions worsen between China and the US, gold prices could continue to move upwards.
Tuesday (April 3)
- 2:00 German Retail Sales. Estimate +0.7%. Actual -0.7%
- 3:00 Spanish Unemployment Change. Estimate -47.5K. Actual -47.7K
- 3:15 Spanish Manufacturing PMI. Estimate 54.7. Actual 54.8
- 3:45 Italian Manufacturing PMI. Estimate 55.6. Actual 55.1
- 3:50 French Final Manufacturing PMI. Estimate 53.6. Actual 53.7
- 3:55 German Final Manufacturing PMI. Estimate 58.4. Actual 58.2
- 4:00 Eurozone Final Manufacturing PMI. Estimate 56.6. Actual 56.6
- Tentative – US IBD/TIPP Economic Optimism. Estimate 55.2
- All Day – US Total Vehicle Sales. Estimate 16.9M
- 16:30 US FOMC Member Lael Brainard Speaks
Wednesday (April 4)
- 5:00 Eurozone CPI Flash Estimate. Estimate 1.4%
- 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.1%
- 5:00 Eurozone Unemployment Rate. Estimate 8.5%
- 8:15 US ADP Nonfarm Employment Change. Estimate 206K
- 10:00 US ISM Non-Manufacturing PMI. Estimate 59.2
*All release times are DST
*Key events are in bold
EUR/USD for Tuesday, April 3, 2018
EUR/USD for April 3 at 5:20 DST
Open: 1.2302 High: 1.2336 Low: 1.2292 Close: 1.2313
EUR/USD was flat in the Asian session and has edged higher in European trade
- 1.2235 is providing support
- 1.2319 was tested earlier in resistance. It is a weak line
Further levels in both directions:
- Below: 1.2235, 1.2092 and 1.2025
- Above: 1.2319, 1.2460, 1.2581 and 1.2662
- Current range: 1.2235 to 1.2319
OANDA’s Open Positions Ratio
EUR/USD ratio is almost unchanged this week. Currently, short positions still have a majority (55%), indicative of EUR/USD to move to higher ground.
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