EUR/USD – Euro subdued at start of week

EUR/USD has ticked higher in the Monday session. Currently, the pair is trading at 1.1468, up 0.08% on the day. On the release front, it’s a quiet day. German WPI shocked with a decline of 1.2%, its weakest reading since December 2008. Eurozone industrial production fell 1.6%, much worse than the forecast of a 0.3% gain. There are no U.S events on the schedule. On Tuesday, the U.S. releases PPI reports and ECB President Draghi will testify about the ECB Annual Report.

The ongoing global trade war continues to hamper manufacturing sectors across the eurozone. Last week, industrial production in Italy fell by 1.6% in November and in France the drop was 1.3%. The alarming trend continued on Monday, as eurozone industrial production declined 1.6%. Germany, the locomotive of the bloc, is also in trouble, in which industrial production has slipped for three straight months. With the three largest economies in the eurozone showing signs of weakness, conditions may not warrant any rate increases in the foreseeable future. The ECB winded up its stimulus program last month, and had expressed plans to raise rates later this year, but this will require stronger economic conditions in the eurozone.

The euro gained ground late in the week, as the Fed’s dovish turn has reduced enthusiasm for the U.S dollar. The minutes from the Fed’s December meeting, released Wednesday, noted that low inflation levels meant that the Fed could “afford to be patient about further policy firming”. Even more striking, the minutes revealed that at the December meeting, some policymakers opposed a rate hike, arguing that inflation was too low to warrant higher rates. On Thursday, Fed Chair Jerome Powell said he was “very worried” about the massive U.S. debt and reiterated that the Fed would remain patient on monetary policy. Given that further interest rate hikes would hurt the debt burden of corporate borrowers, Powell’s remarks on the debt could be a sign that the Fed will take a pause on rate hikes in the near future, and perhaps even entertain a rate cut this year. The sharp U-turn on monetary policy by the Fed could continue to weigh on the U.S dollar for the near future.

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EUR/USD Fundamentals

Monday (January 14)

  • 2:00 German WPI. Estimate 0.3%. Actual -1.2%
  • 5:00 Eurozone Industrial Production. Estimate 0.3%. Actual -1.7%

Tuesday (January 15)

  • 5:00 Eurozone Trade Balance. Estimate 13.2B
  • 8:30 US PPI. Estimate -0.1%
  • 8:30 US Core PPI. Estimate 0.2%
  • 8:30 US Empire State Manufacturing Index. Estimate 11.6
  • 10:00 ECB President Draghi Speaks

*All release times are EST

*Key events are in bold

EUR/USD for Monday, January 14, 2019

EUR/USD for January 14 at 6:55 EST

Open: 1.1458 High: 1.1482 Low: 1.1455 Close: 1.1470

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1212 1.1300 1.1434 1.1553 1.1685 1.1803

EUR/USD inched higher in the Asian session and is flat in European trade

  • 1.1434 is providing support
  • 1.1553 is the next resistance line
  • Current range: 1.1434 to 1.1533

Further levels in both directions:

  • Below: 1.1434, 1.1300, 1.1212 and 1.1120
  • Above: 1.1553, 1.1685 and 1.1803

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

Market Analyst at OANDA
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.