EURUSD – Euro starts week with gains, Investors eye US retail sales

EUR/USD is higher on the Monday session. Currently, the pair is trading at 1.1592, up 0.28% on the day. On the release front, there are no eurozone events. In the U.S, the focus is on retail sales reports. Retail Sales is expected to gain 0.7%, while Core Retail Sales is forecast to climb 0.3%. The U.S Treasury is expected to release the semi-annual currency report.

The week ended on a high note, with solid inflation numbers in Germany. Inflation climbed 2.3% in September on a year-to-year basis, its strongest gain since November 2011. Not surprisingly, much of the increase is a result of higher energy prices, as Brent crude remains above $80 a barrel. Eurozone inflation has also been moving higher and is finally closing in on the ECB’s target of just below 2 percent. Stronger inflation has reinforced speculation that the ECB could raise interest rates for the first time in years in the second half of 2019.

Investors are keeping a close eye on the U.S Treasury’s currency report, which will be released on Thursday. In the most recent report, the U.S did not name any of its major partners as currency manipulators, but it did criticize China for the “non-market direction” of its economy. Since then, the Trump administration has imposed some $200 billion in tariffs on Chinese goods. China has retaliated with its own tariffs on U.S goods, and there has been speculation that China could respond to the U.S tariffs by devaluating the Chinese yuan, in order to bolster Chinese exports. In 2015 and 2016, the markets dropped sharply on fears that China would implement a major devaluation of its currency. The report should be treated as a market-mover.

On Thursday, the ECB released its minutes from the September meeting. Policymakers debated whether to lower their risk assessment, clearly concerned that global trade tensions could dampen eurozone growth. However, the policymakers decided that the eurozone economy was strong enough to allow the ECB to maintain its ‘slow but steady’ stance of tightening policy. The ECB remains on track to end its massive bond purchase program at the end of the year. Meanwhile, with bond yields pointing higher, investors have reacted negatively and stock markets continue to spin lower. On Thursday, German 10-year bonds fetched 0.55%, marking a 6-month high. The U.S dollar often is the winner in times of crisis, providing a safe haven for nervous investors. However, the euro has weathered this latest crisis and held its own against the U.S dollar last week.

Geopolitical risks and yields dominate proceedings

Risk aversion remains at the start of the week

Asia Market Update :echoes of October past

EUR/USD Fundamentals

• 8:30 US Core Retail  Sales. Estimate 0.4%

• 8:30 US Retail Sales. Estimate 0.7%

• 8:30 US Empire State Manufacturing Index. Estimate 20.4

• 10:00 US Business Inventories. Estimate 0.5%

• Tentative – US Treasury Currency Report

• 2:00 German Import Prices. Estimate 0.1%

• 5:00 Eurozone Trade Balance. Estimate15.0B

• 5:00 Eurozone ZEW Economic Sentiment. Estimate -9.2B

• 5:00 German ZEW Economic Sentiment. Estimate -12.3B

• 10:00 US JOLTS Openings. Estimate 6.90M

Open: 1.1559 High: 1.1601 Low: 1.1540 Close: 1.1600

EUR/USD Technical

EUR/USD was flat in the Asian session and has edged higher in European trade

• 1.1553 is providing support

• 1.1637 is the next line of resistance

Further levels in both directions:

• Below: 1.1553, 1.1434, 1.1300 and 1.1190

• Above: 1.1637, 1.1718 and 1.1840

• Current range: 1.1553 to 1.1637