EUR/USD – Euro steady, but contraction in German manufacturing raises concerns

It’s been a relatively quiet week for EUR/USD, and pair is unchanged on Thursday. Currently, the pair is trading at 1.1341, up 0.04% on the day. It’s a very busy day for fundamentals in the eurozone and the United States. German CPI declined 0.8%, matching the forecast. Manufacturing data was dismal, as German and eurozone manufacturing PMIs dropped below the 50-level, pointing to contraction. Services PMIs were stronger, as the German and eurozone readings indicated expansion. In the U.S., the markets are expecting positive news. Durable goods orders is projected to post a strong gain of 1.6%, while unemployment claims is forecast to fall to 228 thousand. On Friday, Germany releases GDP and Ifo Business Climate, and the eurozone will post CPI data.

The global trade war continues to weigh on the manufacturing sectors worldwide, and the eurozone and Germany have not been immune. German manufacturing PMI fell to 47.6, its second successive contraction. This was the lowest level since December 2012. The all-euro reading slipped to 49.2, its first contraction since June 2013. Earlier this week, ZEW economic sentiment surveys posted scores deep in negative territory for Germany and the eurozone. With the German locomotive showing clear signs of a slowdown, the ECB is unlikely to raise rates in the near future, possibly holding off until 2020.

The Federal Reserve minutes release failed to excite investors, as the euro is showing little movement. Policymakers spelled out that the Fed will remain cautious, stating that a “patient approach to monetary policy” was appropriate. However, policymakers added that if economic projections improved, the Fed could revise the “patient approach”. The minutes noted that the employment market had strengthened and economic activity was rising, but expected GDP in 2019 to slow down compared to 2018.

Fed tries to stay ahead of the (yield) curve

Aussie surges on strong jobs report

EUR/USD Fundamentals

Thursday (February 21)

• 2:00 German Final CPI. Estimate -0.8%. Actual -0.8%
  
• 2:45 French Final CPI. Estimate -0.5%. Actual -0.4%
• 3:15 French Flash Services PMI. Estimate 48.6. Actual 49.8
• 3:15 French Flash Manufacturing PMI. Estimate 51.0. Actual 51.4
• 3:30 German Flash Manufacturing PMI. Estimate 49.7. Actual 47.6
  
• 3:30 German Flash Services PMI. Estimate 52.8. Actual 55.1
  
• 4:00 Eurozone Flash Manufacturing PMI. Estimate 50.3. Actual 49.2
  
• 4:00 Eurozone Flash Services PMI. Estimate 51.4. Actual 52.3
  
• 4:50 Spanish 10-year Bond Auction. Actual 1.29/1.2
• 7:30 ECB Monetary Policy Meeting Accounts
• 8:30 US Core Durable Goods Orders. Estimate 0.3%
• 8:30 US Durable Goods Orders. Estimate 1.6%
• 8:30 US Philly Fed Manufacturing Index. Estimate 14.1
• 8:30 US Unemployment Claims. Estimate 228K
• 9:45 US Flash Manufacturing PMI. Estimate 54.9
• 9:45 US Flash Services PMI. Estimate 54.4
• 10:00 US CB Leading Index. Estimate 0.1%
• 10:00 US Existing Home Sales. Estimate 5.01M
• 10:30 US Crude Oil Inventories. Estimate 2.9M

Friday (February 22)

• 2:00 German Final GDP. Estimate 0.0%
• 4:00 German Ifo Business Climate. Estimate 99.0
• 5:00 Eurozone Final CPI. Estimate 1.4%
• 5:00 Eurozone Final Core PI. Estimate 1.1%
• 10:30 ECB President Draghi Speaks

*All release times are EST

*Key events are in bold

EUR/USD for Thursday, February 21, 2019

EUR/USD for February 21 at 6:40 EST

Open: 1.1337 High: 1.1363 Low: 1.1320 Close: 1.1341

EUR/USD Technical

EUR/USD showed limited movement in the Asian session. The pair is showing stronger movement in the European session but remains almost unchanged

• 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 1.1046
• Above: 1.1434, 1.1553 and 1.1685

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