EURUSD – Euro Rise Continues on Broad Dollar Weakness

The euro continues its upward movement and has posted gains in the Thursday session.  Currently, the pair is trading at 1.2483, up 0.27% on the day. In the eurozone, the trade surplus continues to grow, climbing to EUR 23.8 billion. This beat the forecast of EUR 22.4 billion. It’s a busy day in the US, highlighted by PPI and Core PPI reports for January. Both indicators are expected to record gains after declining in the December readings. The US will also release key manufacturing reports and unemployment claims. On Friday, the US releases key housing and consumer confidence numbers.

The euro has posted winning sessions every day this week, and continues to move upwards on Thursday. The euro has gained 1.8% this week, and posted strong gains on Wednesday, after the US releases pointed to stronger inflation and dismal retail sales.

The US dollar remains under strong pressure after Wednesday’s CPI and retail sales reports. CPI jumped 0.5%, above the estimate of 0.3%. Consumer spending reports in January were dismal. Retail Sales was flat at 0.0%, short of the estimate of 0.5%. Core Retail Sales declined 0.3%, well off the forecast of +0.2%. A catalyst for the recent market sell-off was fear of higher inflation, and with inflation indicators pointing upwards, the dollar and the stock markets could be in for rough ride in the coming weeks.

The recent stock market turbulence has triggered volatility in the currency markets, and this is causing concern at the ECB. Last week, ECB President Mario Draghi said that he is more confident 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.

EUR/USD Fundamentals

• 4:00 Italian Trade Balance. Estimate 4.44B. Actual 5.25B

• 5:00 Eurozone Trade Balance. Estimate 22.4B. Actual 23.8B

• Tentative – Spanish 10-year Bond Auction. Actual 1.58%

• 8:30 US PPI. Estimate 0.4%

• 8:30 US Core PPI. Estimate 0.2%

• 8:30 US Empire State Manufacturing Index. Estimate 17.7

• 8:30 US Philly Fed Manufacturing Index. Estimate 21.5

• 8:30 US Unemployment Claims. Estimate 229K

• 9:15 US Capacity Utilization Rate. Estimate 78.0%

• 9:15 US Industrial Production. Estimate 0.2%

• 10:00 US NAHB Housing Market Index. Estimate 72

• 10:30 US Natural Gas Storage. Estimate -193B

• 16:00 US TIC Long-Term Purchases. Estimate 50.3B

• 2:00 German WPI. Estimate 0.2%

• 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

Open: 1.2450 High: 1.2510 Low: 1.2448 Close: 1.2483

EUR/USD Technical

EUR/USD continues to break through resistance lines. The pair inched higher in the Asian session and has recorded stronger gains in European trade

• 1.2481 has switched to a support role after gains by the pair on Thursday

• 1.2569 is the next 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