Euro Dips Lower, Eurozone Inflation Matches Forecast

The euro is down slightly in the Friday session. Currently, EUR/USD is trading at 1.2048, down 0.17% on the day. On the release front, German Retail Sales sparkled, with a gain of 2.3%. This easily beat the estimate of 1.0%. Eurozone CPI Flash Estimate ticked lower to 1.4%, but matched the forecast. In the US, the focus remains on job data, with the release of Average Hourly Earnings and Nonfarm Payrolls. Wage growth is expected to gain 0.3%, but the markets are braced for a slowdown in Nonfarm Payrolls, with an estimate of 190 thousand. We’ll also get a look at ISM Non-Manufacturing PMI, which is expected to edge up to 57.6 points.

German numbers from December continue to impress the markets. Retail Sales soared 2.3%, its fastest pace since October 2016. Services and Manufacturing PMIs improved and continue to point to strong expansion. The labor market remains robust, as unemployment rolls dropped sharply. The economy hasn’t missed a beat, despite an uncertain political landscape in the eurozone’s largest economy. President Angela Merkel is now looking at the Social Democrats to help her make a new government, and preliminary talks are scheduled to begin on Sunday. The negotiations are likely to be lengthy, and strong disagreements on immigration policy and taxation could unravel the talks, which would trigger new elections.

The highly-anticipated Federal Reserve minutes were released on Wednesday. The minutes provided details of the December policy meeting, where the Fed raised interest rates for a third time in 2018. The minutes were positive in tone, reflecting a robust US economy. Policymakers noted that economic activity was expanding at a “solid pace”, buoyed by improved consumer and business spending, as well as a stronger global economy. FOMC members revised upwards their projection for GDP in 2018, from 2.1% to 2.5%. The minutes noted that new tax reform is expected to raise economic growth, but the Fed is unsure on the impact of the new law in areas such as the labor market. As for inflation, Fed officials remain concerned that inflation levels are well below the target of 2%, and this trend could continue.

EUR/USD Fundamentals

Friday (January 5)

  • 2:00 German Retail Sales. Estimate 1.0%. Actual 2.3%
  • 2:45 French Preliminary CPI. Estimate 0.3%. Actual 0.3%
  • 4:10 Eurozone Retail PMI. Actual 53.0
  • 5:00 Eurozone CPI Flash Estimate. Estimate 1.4%. Actual 1.4%
  • 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 0.9%
  • 5:00 Eurozone PPI. Estimate 0.3%. Actual 0.6%
  • 5:00 Italian Preliminary CPI. Estimate 0.2%. Actual 0.4%
  • 8:30 US Average Hourly Earnings. Estimate 0.3%
  • 8:30 US Nonfarm Employment Change. Estimate 190K
  • 8:30 US Unemployment Rate. Estimate 4.1%
  • 8:30 US Trade Balance. Estimate -49.7B
  • 10:00 US ISM Non-Manufacturing PMI. Estimate 57.6
  • 10:00 US Factory Orders. Estimate 1.1%
  • 12:30 US FOMC Member Loretta Mester Speaks

*All release times are GMT

*Key events are in bold

EUR/USD for Friday, January 5, 2018

EUR/USD Chart For January 4-5

EUR/USD for January 5 at 5:30 EDT

Open: 1.2068 High: 1.2080 Low: 1.2042 Close: 1.2048

EUR/USD Technical


EUR/USD was flat in the Asian session. The pair has posted small losses in European trade

  • 1.1961 is providing support
  • 1.2092 is the next resistance line

Further levels in both directions:

  • Below: 1.1961, 1.1876, 1.1777 and 1.1657
  • Above: 1.2092, 1.2221 and 1.2357
  • Current range: 1.1961 to 1.2092

OANDA’s Open Positions Ratio

EUR/USD ratio is showing little movement in the Friday session. Currently, short positions have a majority (69%), indicative of EUR/USD continuing to move lower.

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