EURUSD – Euro Softer, German and Eurozone CPI Match Expectations

EUR/USD has posted losses in the Wednesday session, continuing the downward trend we saw on Tuesday. Currently, the pair is trading at 1.1803, down 0.31% on the day. On the release front, German and eurozone CPI releases matched their estimates. ECB President Mario Draghi will speak at an ECB event in Frankfurt. In the U.S, Housing Starts and Building Permits are expected to remain unchanged, at 1.32 million and 1.35 million, respectively. On Thursday, the U.S releases Philly Fed Manufacturing Index and unemployment claims.

German Final CPI continues to lose ground. The indicator dropped to 0.0%, marking a 3-month low. Eurozone Final CPI edged lower to 1.2%, down from 1.3% a month earlier. Eurozone Final Core CPI followed a similar trend, dropping from 1.0% to 0.7%. If inflation levels continue to soften, the ECB will have to consider extending its stimulus scheme, which is scheduled to run until September. Germany will release additional inflation numbers on Friday.

First-quarter eurozone and German GDP data were within expectations, but investors should not become too sanguine, as the numbers pointed to a slowdown in the eurozone economy. Both Germany and the eurozone posted gains of 0.6% in the fourth quarter of 2017. Will economic conditions improve in Q2? Institutional analysts don’t seem optimistic, according to the well-respected ZEW Economic Sentiment surveys. The German indicator posted a sharp drop of -8.2 for a second straight month – the first declines since July 2016. The eurozone release improved to 2.4, but low reading certainly doesn’t show much optimism. The markets are bracing for more soft numbers on Wednesday, as Germany and eurozone release CPI reports. If these indicators miss their estimates, the euro could lose ground.

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EUR/USD Fundamentals

• 2:00 German Final CPI. Estimate 0.0%. Actual 0.0%

• 5:00 Eurozone Final CPI. Estimate 1.2%. Actual 1.2%

• 5:00 Eurozone Final Core CPI. Estimate 0.7%. Actual 0.7%

• 5:35 German 10-year Bond Auction. Actual 0.62%

• 8:00 ECB President Mario Draghi Speaks

• 8:30 US Building Permits. Estimate 1.35M

• 8:30 US FOMC Member Raphael Bostic Speaks

• 8:30 US Housing Starts. Estimate 1.32M

• 9:15 US Capacity Utilization Rate. Estimate 78.4%

• 9:15 US Industrial Production. Estimate 0.6%

• 10:00 US Mortgage Delinquencies

• 10:30 US Crude Oil Inventories. Estimate -1.1M

• 8:30 US Philly Fed Manufacturing Index. Estimate 21.1

• 8:30 US Unemployment Claims. Estimate 219K

Open: 1.1837 High: 1.1854 Low: 1.1802 Close: 1.1803

 

EUR/USD Technical

S1	S2	S1	R1	R2	R3
1.1448	1.1613	1.1718	1.1809	1.1915	1.2025

EUR/USD continues to break below support levels this week. The pair inched lower in the Asian session but then recovered. EUR/USD has edged lower in European trade

• 1.1718 is a providing support

• 1.1809 has switched to a resistance role after losses by EUR/USD on Wednesday. It is a weak line

Further levels in both directions:

• Below: 1.1718, 1.1613 and 1.1448

• Above: 1.1809, 1.1915, 1.2025 and 1.2092

• Current range: 1.1718 to 1.1809