EUR/USD – Euro slightly higher, shrugs off soft German economic outlook

EUR/USD is slightly higher on Tuesday, erasing the gains seen on Monday. Currently, the pair is trading at 1.1235, up 0.11% on the day. On the release front, German ZEW Economic Sentiment declined by 2.1, missing the estimate of 5.1. The eurozone release followed the same trend, dropping by 1.6. This was well short of the estimate of 5.0. There was better news from German Final CPI jumped to 1.0%, matching the estimate. There are no major U.S. events on the schedule. On Wednesday, Germany and the eurozone release GDP reports. The U.S. will post retail sales and the Empire State manufacturing index.

The well-respected ZEW economic sentiments disappointed in May. The German release ended a long streak of declines in April, with a gain of 3.1. The indicator slipped to 2.1 in May, pointing to pessimism. Eurozone ZEW economic sentiment posted a decline of 1.6 in May, after a score of 4.5 in April. The economic outlooks for the eurozone and Germany are not promising, as the trade war between China and the U.S. has escalated with another round of tariffs between the sides. The U.S. raised tariffs on some $200 billion in Chinese goods, from 10% to 25%. A response followed quickly, as China announced tariffs on $60 billion in U.S. goods. As well, China has allowed the yuan to fall to its lowest level in four months. A lower yuan makes Chinese exports more competitive and will cushion the effect of the new U.S. tariffs, which makes Chinese goods more expensive for U.S. consumers. Despite the rise in tensions between China and the U.S., the new tariffs do not take effect immediately. The U.S. tariffs do not apply to Chinese goods that are in transit, and the shipping of goods across the Pacific can take up to three weeks. The Chinese tariffs do not kick in until June. This hiatus gives negotiators some breathing room before the tariffs take effect.

EUR/USD Fundamentals

Tuesday (May 14)

• 2:00 German Final CPI. Estimate 1.0%. Actual 1.0%

• 2:00 German WPI. Estimate 0.4%. Actual 0.6%

• 3:15 US FOMC Member Williams Speaks

• 5:00 German ZEW Economic Sentiment. Estimate 5.1

• 5:00 Eurozone ZEW Economic Sentiment. Estimate 5.0

• 5:00 Eurozone Industrial Production. Estimate -0.3%

• 6:00 US NFIB Small Business Index. Estimate 102.3

• 8:30 US Import Prices. Estimate 0.7%

• 12:45 US FOMC Member George Speaks

Wednesday (May 15)

• 2:00 German Preliminary GDP. Estimate 0.4%

• 5:00 Eurozone Flash GDP. Estimate 0.4%

• 8:30 US Core Retail Sales. Estimate 0.7%

• 8:30 US Retail Sales. Estimate 0.2%

• 8:30 US Empire State Manufacturing Index. Estimate 8.2

EUR/USD Technical

EUR/USD posted slight gains in the Asian session and is showing limited movement in European trade

• 1.1212 is providing support

• 1.1300 is the next resistance line

• Current range: 1.1212 to 1.1300

Further levels in both directions:

• Below: 1.1212, 1.1120, 1.1046 and 1.0950

• Above: 1.1300, 1.1434 and 1.1553