EUR/USD – Euro Kicks Off New Year at 1.20

EUR/USD hasn’t missed a beat as we start 2018, posting gains in the Tuesday session. Currently, EUR/USD is trading at 1.2067, up 0.55% on the day. The pair is at its highest level since early September. On the release front, German and Eurozone Manufacturing PMIs improved in December. German Manufacturing PMI came in at 63.3, while Eurozone Manufacturing PMI climbed to 60.6 points. Both indicators matched their estimates. On Wednesday, Germany releases Unemployment Change. In the US, the FOMC will publish the minutes of its December meeting, and we’ll get a look at ISM Manufacturing PMI.

German inflation ended the year on a strong note, as Preliminary CPI accelerated to 0.6% in December. This edged above the forecast of 0.5%. The sharp gain matched the February reading, equaling the strongest gain recorded in 2017. Earlier this month, in a nod to stronger economic activity in 2017, the ECB raised its forecasts for growth and inflation for the eurozone from this year through to 2019. Still, inflation remains well below the ECB target of around 2.0%, and ECB policymakers are unlikely to announce an end to their stimulus package until inflation moves closer to the 2.0% target.

Investors will be monitoring the Federal Reserve on Wednesday, with the release of the minutes of the December meeting. At that meeting, the Fed raised rates by 25 basis points, to a range between 1.25-1.50%. The hike marks a vote of confidence in the US economy, and if the minutes are hawkish, the US dollar could gain ground and stem the euro rally. If the US economy continues to expand at a clip exceeding 3%, the Fed is expected to raise rates up to four times in 2018. Currently, the CME Group has priced in a January rate hike at 98.5%. Although inflation remains well below the Fed target of 2.0%, outgoing Fed Chair Janet Yellen and other FOMC members have said that they expect that the strong labor market will lead to higher inflation. Although this is yet to materialize, of significance to the markets is the commitment of the Fed to press ahead with rate hikes, despite low inflation.

EUR/USD Fundamentals

Tuesday (January 2)

  • 3:15 Spanish Manufacturing PMI. Estimate 56.4. Actual 55.8
  • 3:45 Italian Manufacturing PMI. Estimate 58.6. Actual 57.4
  • 3:50 French Manufacturing PMI. Estimate 59.3. Actual 58.8
  • 3:55 German Manufacturing PMI. Estimate 63.3. Actual 63.3
  • 4:00 Eurozone Manufacturing PMI. Estimate 60.6. Actual 60.6
  • 9:45 US Final Manufacturing PMI. Estimate 55.0

Wednesday (January 3)

  • 3:55 German Unemployment Change. Estimate -14K
  • 10:00 US ISM Manufacturing PMI. Estimate 58.3
  • 14:00 US FOMC Meeting Minutes

*All release times are GMT

*Key events are in bold

EUR/USD for Tuesday, January 2, 2018

EUR/USD for January 2 at 5:20 EDT

Open: 1.2002 High: 1.2054 Low: 1.2002 Close: 1.2067

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1777 1.1876 1.1961 1.2092 1.2221 1.2357

EUR/USD inched up in the Asian session and has posted considerable gains in European trade

  • 1.1961 is providing support
  • 1.2092 has weakened following gains by EUR/USD on Tuesday

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

In the Tuesday session, EUR/USD ratio is showing short positions with a majority (65%). This is indicative of EUR/USD reversing directions and moving downwards.

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

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.