EUR/USD – Euro Gains Ground, Markets Look Ahead to Eurozone, Germany GDP

EUR/USD is unchanged in the Monday session. Currently, the pair is trading at 1.1981, up 0.33% on the day. It’s a very quiet start to the day, with no eurozone or U.S indicators on the schedule. The sole U.S event is a speech from FOMC member Loretta Mester. On Tuesday, there are two key events out of Germany – Preliminary GDP and ZEW Economic Sentiment. The US will release Retail Sales and Core Retail Sales.

With the U.S economy firing on all cylinders, the U.S consumer is feeling very optimistic. On Friday, the UoM Consumer Sentiment improved to 98.8 in April, beating the estimate of 98.4 points. The U.S labor market is at near or full employment, which has resulted in a slowdown in job growth due to a shortage of skilled workers. This was underscored last week, as JOLTS Job Openings climbed to a record 6.6 million. At the same time, inflation levels remain low, as the Federal Reserve target of 2 percent remains elusive. CPI rebounded with a gain of 0.2%, but this fell short of the estimate of 0.3%. Core CPI edged lower to 0.1%, shy of the forecast of 0.2%. Inflation levels will be an important factor for the Fed in its monetary policy projection, which remains at two more hikes in 2018. The odds of a rate hike at the June hike stands close to 100%.

Investors will be keeping a close eye on German data on Tuesday, with the release of Preliminary GDP and ZEW Economic Sentiment. The eurozone will also publish these indicators. Growth in the eurozone slowed in the first quarter, and GDP in both Germany and the eurozone is expected to fall from 0.6% in the fourth quarter to 0.4% in the first quarter of 2018. The markets are also bracing for weak numbers from the monthly ZEW surveys, which examines confidence levels among institutional investors and analysts. The German release was very soft in April, dropping -8.2 points. Another poor reading is expected in May, with an estimate of -8.0 points. The ZEW eurozone indicator also dropped sharply in April to 1.9, and little change is forecast in the May release.

EUR/USD Fundamentals

Monday (May 14)

• 2:45 US FOMC Member Loretta Mester Speaks

Tuesday (May 15)

• 2:00 German Preliminary GDP. Estimate 0.4%

• 2:45 French Final CPI. Estimate 0.1%

• 5:00 Eurozone Flash GDP. Estimate 0.4%

• 5:00 German ZEW Economic Sentiment. Estimate -8.0

• 5:00 Eurozone Economic Sentiment. Estimate 2.0

• 8:30 US Core Retail Sales. Estimate 0.5%

• 8:30 US Retail Sales. Estimate 0.4%

• 8:30 US Empire State Manufacturing Index. Estimate 15.1

Open: 1.1941 High: 1.1990 Low: 1.1939 Close: 1.1981

EUR/USD Technical

EUR/USD inched higher in the Asian session and has edged upwards in European trade

• 1.1915 is providing support

• 1.2025 is the next resistance line

Further levels in both directions:

• Below: 1.1915, 1.1809, 1.1718 and 1.1613

• Above: 1.2025, 1.2092 and 1.2235

• Current range: 1.1915 to 1.2025