EUR/USD – Euro moves higher, shrugs off soft German confidence report

EUR/USD has moved higher in the Tuesday session, continuing the upward movement seen on Monday. Currently, the pair is trading at 1.1373, up 0.23% on the day. On the release front, German Ifo Business Climate dipped to 101.0, down from 102.0 and shy of the estimate of 101.8. This is the fourth straight drop for the indicator, as business confidence continues to weaken, albeit slowly. Building permits is expected to edge higher to 1.27 million, and housing starts is forecast to remain unchanged at 1.23 million. On Wednesday, Canada releases CPI. Investors will be keeping a close look at the Federal Reserve is expected to raise the benchmark rate by a quarter-point.

A milestone was reached last week, as the ECB officially terminated its bond-purchasing program (QE), after three years. The program pumped some 2.6 trillion euros into the economy, and played an important role in boosting growth and inflation levels. However, the move comes at a time when the eurozone economy has slowed down, after a strong performance in the first half of 2018. Final CPI dropped to 1.9% in November, down from 2.2% a month earlier. This was below the initial forecast of 2 percent.

After a weak third quarter of growth in the eurozone, there are serious concerns that the slowdown will affect fourth quarter numbers as well. Global trade tensions have taken a bite out of eurozone exports, and uncertainty over Brexit and the Italian budget have soured investor confidence, which has put pressure on the euro. EUR/USD has declined 2.7% since July 1, and faces more headwinds before the end of the year.

The Federal Reserve is expected to raise interest rates on Wednesday, which would mark the fourth rate hike in 2018. The CME has pegged the odds of a rate hike at 69%, down from 80% just one week ago. A key factor in the drop is the latest equity sell-off. The week started poorly, as the S&P fell on Monday to its lowest level since October 2017. Rate hikes are unusual when stock markets are swooning, so traders should be prepared for the Fed to send a dovish message to the markets, along with a quarter-point rate hike.

Stocks resume December swoon; Russell 2000 enters bear market territory

A not so “Silent Night” in the markets

Tuesday (December 18)

EUR/USD Fundamentals

  • 4:00 German Ifo Business Climate. Estimate 101.8. Actual 101.0
  • 8:30 US Building Permits. Estimate 1.27M
  • 8:30 US Housing Starts. Estimate 1.23M

Wednesday (December 19)

  • 2:00 German PPI. Estimate -0.1%
  • 8:30 US Current Account. Estimate -125B
  • 9:00 Belgian NBB Business Climate. Estimate -0.9
  • 10:00 US Existing Home Sales. Estimate 5.20M
  • 10:30 US Crude Oil Inventories
  • 14:00 US FOMC Economic Projections
  • 14:00 US FOMC Statement
  • 14:00 US Federal Funds Rate. Estimate <2.50%
  • 14:30 US FOMC Press Conference

*All release times are EST

*Key events are in bold

EUR/USD for Tuesday, December 18, 2018

EUR/USD for December 18 at 5:50 EST

Open: 1.1348 High: 1.1367 Low: 1.1336 Close: 1.1362

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1120 1.1212 1.1300 1.1434 1.1553 1.1685

EUR/USD ticked upwards in the Asian session and has edged higher in European trade

  • 1.1300 is providing support
  • 1.1434 is the next resistance line
  • Current range: 1.1300 to 1.1434

Further levels in both directions:

  • Below: 1.1300, 1.1212, 1.1120 and 1.0992
  • Above: 1.1434, 1.1553 and 1.1685

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.