EUR/USD – Euro Hits 3-Year Higher as German Inflation Jumps

The euro rally is steady in the Friday session. Currently, the pair is trading at 1.2503, down 0.02% on the day. On the release front, the German Wholesale Price Index climbed 0.9% in January, rebounding from a reading of 0.3% in December. In the US, Building Permits is expected to inch lower to 1.30 million, and Housing Starts are projected to improve to 1.23 million. As well, UoM Consumer Sentiment is expected to rise to 95.4 points.

The euro continues to trade above the 1.25 level this week. Earlier on Friday, EUR/USD touched its highest level since December 2014, as the US dollar remains under broad pressure. The euro has posted winning sessions every day this week, and the currency has gained 2.1% this week. US inflation indicators pointed upwards this week, but investors chose to focus on soft retail sales reports for January – Retail Sales posted a flat reading of 0.0%, and Core Retail Sales declined 0.3%, marking its first decline in five months.

The recent volatility in the currency markets has not gone unnoticed by Mario Draghi & Co. Last week, the ECB head expressed confidence that eurozone inflation is moving closer to the Bank’s target of just below 2 percent, due to improving economic growth. However, Draghi listed currency market volatility as an obstacle to the inflation target, and added that the ECB would carefully monitor the euro’s exchange rates. The ECB tapered its massive stimulus program from EUR 60 billion to 30 billion/mth in January, and the markets are on the lookout for hints as to whether the ECB will normalize policy and wind up stimulus in September. Any hints from ECB policymakers about a change in policy could have a strong impact on the movement of the euro.

US Bond Auction TIPS the dollar

EUR/USD Fundamentals

Friday (February 16)

• 2:00 German WPI. Estimate 0.2%. Estimate 0.9%

• 8:30 US Building Permits. Estimate 1.29M

• 8:30 US Housing Starts. Estimate 1.23M

• 8:30 US Import Prices. Estimate 0.6%

• 10:00 US Preliminary UoM Consumer Sentiment. Estimate 95.4

• 10:00 US Preliminary UoM Inflation Expectations

Open: 1.2506 High: 1.2556 Low: 1.2497 Close: 1.2503

EUR/USD Technical

EUR/USD posted gains in the Asian session but has retracted in European trade

• 1.2481 is providing support role

• 1.2569 is a weak resistance line

Further levels in both directions:

• Below: 1.2481, 1.2357, 1.2286 and 1.2200

• Above: 1.2569, 1.2660 and 1.2751

• Current range: 1.2481 to 1.2569