EUR/USD has edged lower in the Wednesday session. Currently, the pair is trading at 1.1436, down 0.26%. On the release front, Germany and the Eurozone posted manufacturing PMIs, with readings of 51.5 and 51.4, respectively. Market forecasts were on the money, as both readings matched the forecast. On Wednesday, the U.S. will release ADP nonfarm payrolls and unemployment claims.
The global trade war has taken a bite out of European and German exports, and this in turn has put a damper on the manufacturing sectors. European and German manufacturing PMIs continued to fall in December, with both indicators recording a fifth consecutive decline, as manufacturing growth has stagnated. If the negative trend continues, the euro will be under increasing pressure.
U.S. and Chinese teams will meet next week to tackle trade issues, and any progress in the talks would likely boost investor confidence. At the same time, the U.S. has said if the talks fail, it will impose heavy tariffs on Chinese products on March 1, so traders should be prepared for some volatility from EUR/USD in the weeks ahead. Earlier in the week, President Trump said that ‘big progress’ had been made with China, but with the sides yet to meet face-to-face, the markets are not putting much stock in Trump’s remarks.
After four rate hikes in 2018, the Federal Reserve will be drastically easing up on raising rates in 2019. Just a few months ago, there was heady talk of three or four rate hikes in 2019, but the Fed made an abrupt U-turn, saying the “neutral rate range” had been reached. Analysts expect one rate hike in 2019, as this year’s hikes and the global trade war have lessened the pace of expansion in the U.S. economy. According to the CME Group, the likelihood that the Fed will stay on the sidelines in January and March stands at 98% and 93%, respectively. This dovish stance from the Fed could weigh on the dollar in the coming months.
Wednesday (January 2)
- 3:15 Spanish Manufacturing PMI. Estimate 52.4. Actual 51.1
- 3:45 Italian Manufacturing PMI. Estimate 48.5. Actual 49.2
- 3:50 French Final Manufacturing PMI. Estimate 49.7. Actual 49.7
- 3:55 German Final Manufacturing PMI. Estimate 51.5. Actual 51.5
- 4:00 Eurozone Final Manufacturing PMI. Estimate 51.4. Actual 51.4
- 9:45 US Final Manufacturing PMI. Estimate 53.9
Thursday (January 3)
- 4:00 Eurozone M3 Money Supply. Estimate 3.8%
- 4:00 Eurozone Private Loans. Estimate 3.3%
- 7:30 US Challenger Job Cuts
- 8:15 US ADP Non-Farm Employment Change. Estimate 179K
- 8:30 US Unemployment Claims. Estimate 220K
- 10:00 US ISM Manufacturing PMI. Estimate 57.7
*All release times are EST
*Key events are in bold
EUR/USD for Wednesday, January 2, 2019
EUR/USD for January 2 at 5:15 EST
Open: 1.1466 High: 1.1497 Low: 1.1422 Close: 1.1436
In the Asian session, EUR/USD posted small losses. In European trade, the pair moved higher but has given up these gains
- 1.1434 is a weak support level. It could be tested in the Wednesday session
- 1.1553 is the next resistance line
- Current range: 1.1434 to 1.1553
Further levels in both directions:
- Below: 1.1434, 1.1300, 1.1212 and 1.1120
- Above: 1.1553, 1.1685 and 1.1803
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