EUR/USD – Euro under pressure as German manufacturing sags

EUR/USD continues to lose ground this week. In the Thursday session, the pair is trading at 1.1329, down 0.13% on the day. In economic news, German industrial production declined by 0.4%, well short of the forecast of a 0.8% gain. The ECB released its economic forecasts for EU members. In the U.S., unemployment claims is expected to drop sharply, with an estimate of 220 thousand. On Friday, Germany releases trade balance.

Global trade tensions and weakness in the German auto sector continue to weigh on the manufacturing sector. Industrial production fell 0.3% in December, its sixth decline in seven months. This follows manufacturing production, which plunged 1.6% in December. Manufacturing PMI in January slipped below the 50-level, which separates contraction from expansion, for the first time in over four years. Weakness in manufacturing can be seen across the eurozone, as France and Italy both posted manufacturing PMIs in contraction territory in January. German consumer indicators have also stumbled, raising concerns about the health of the eurozone’s largest economy. CPI declined by 0.8% in January and retail sales plunged 4.3% in December. If the soft numbers continue, the euro will be hard pressed to hold its own against the dollar.

The European commission economic forecast has projected moderate growth in the EU, but uncertainty has dampened confidence. The bank’s lowered its growth forecast for the eurozone to 1.9% in 2018, down from 2.1% in the November forecast. For 2019, the growth forecast has also been revised down to 1.5%, compared to 1.9% in the November forecast. Inflation slipped in late 2018 due to lower oil prices, with an average inflation level of 1.7%. This is expected to dip to 1.6% in 2019. The report highlighted Brexit and the slowdown in China as key sources of uncertainty for European economies, adding that the projections were subject to downside risks.

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EUR/USD Fundamentals

Thursday (February 7)

• 2:00 German Industrial Production. Estimate 0.8%. Actual -0.4%
  
• 2:45 French Trade Balance. Estimate -4.1B. Actual -4.7B
• 4:00 ECB Economic Bulletin
• 4:00 Italian Retail Sales. Estimate -0.1%. Actual -0.7%
• 5:00 EU Economic Forecasts
• 5:02 French 10-year Bond Auction. Actual 0.57/2.2
• 8:30 US Unemployment Claims. Estimate 220K
• 9:30 US FOMC Member Clarida Speaks
• 10:30 US Natural Gas Storage. Estimate -228B
• 13:01 US 30-year Bond Auction
• 15:00 US Consumer Credit. Estimate 16.5B
• 19:30 US FOMC Member Bullard Speaks

Friday (February 8)

• 2:00 German Trade Balance. Estimate 18.1B

*All release times are EST

*Key events are in bold

EUR/USD for Thursday, February 7, 2019

EUR/USD for February 7 at 6:50 EST

Open: 1.1362 High: 1.1369 Low: 1.1332 Close: 1.1329

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted small slight losses in European trade

• 1.1300 is providing weak 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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