EUR/USD drifting but ECB could shake up euro

EUR/USD continues to have a quiet week. Currently, the pair is trading at 1.1360, down 0.01% on the day. On the release front, there are no major events out of the U.S. or the eurozone, so traders can expect a quiet day for the pair. The eurozone will release consumer confidence, which is expected to post a second straight decline of -6 points. On Thursday, Germany and the eurozone release PMI reports and the ECB will set interest rates and we’ll hear from Mario Draghi at a press conference. The U.S. will release unemployment claims.

With the global trade war showing no signs of easing, it is no surprise that growth forecasts for 2019 are heading south. On Tuesday, the International Monetary Fund lowered its global and eurozone growth forecasts. In October, the IMF projected global growth of 3.7% percent, but this has been revised to 3.5 percent. IMF head Christine Lagarde said that the world’s economy continues to expand, but “it is facing significantly higher risks”. The forecast for Germany was lowered to 1.3%, down from 1.9% in December. The IMF said that German growth had been dampened by weak consumer demand and lower factory production, notably in the car industry. The grim forecast follows a soft Chinese GDP, which dropped to 6.6% in 2018, its weakest level since 1990.

The ECB has been below the radar over the past few weeks, overshadowed by the Federal Reserve. Policymakers at the Fed have shown a significantly more dovish stance since the December policy meeting, which has weighed on the U.S. dollar while sending the stock markets higher. The ECB terminated its massive stimulus package in December, and a natural follow-up move would be a modest hike in interest rates – if the eurozone economy was performing well. That hasn’t been the case, as the economy slowed in the third quarter of 2018 and all signs are Q4 will also be soft. Analysts had predicted a rate hike in the third quarter, but sluggish economic activity has pushed off that forecast until the fourth quarter. The markets are keeping a close eye on the ECB policy meeting on Thursday, looking for clues with regard to future rate policy.

US cancels trade planning meeting with China

Markets continue to pare gains in light trade

EUR/USD Fundamentals

Wednesday (January 23)

• 9:00 US HPI. Estimate 0.3%
• 10:00 Eurozone Consumer Confidence. Estimate -6
• 10:00 US Richmond Manufacturing Index. Estimate -2

Thursday (January 24)

• 3:15 French Flash Manufacturing PMI. Estimate 50.0
• 3:15 French Flash Services PMI. Estimate 50.6
• 3:30 German Flash Manufacturing PMI. Estimate 51.6
• 3:30 German Flash Services PMI. Estimate 52.2
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 51.5
• 4:00 Eurozone Flash Services PMI. Estimate 51.5
• 7:45 ECB Main Refinancing Rate. Estimate 0.00%
• 8:30 ECB Press Conference
• 8:30 US Unemployment Claims. Estimate 212K

*All release times are EST

*Key events are in bold

EUR/USD for Wednesday, January 23, 2019

EUR/USD for January 23 at 4:50 EST

Open: 1.1366 High: 1.1373 Low: 1.1346 Close: 1.1360

EUR/USD Technical

EUR/USD posted small gains in the Asian session. The pair ticked higher in European trade but has given up these gains

• 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 and 1.1120
• Above: 1.1434, 1.1553, 1.1685 and 1.1803

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