EURUSD – Euro trading sideways as German inflation matches forecast

EUR/USD almost unchanged in the Friday session. Currently, the pair is trading at 1.1645, up 0.05% on the day. On the release front, German PPI dipped to 0.3%, matching the estimate. The eurozone current account surplus dropped sharply to 22.4 billion. This was well short of the forecast of 27.2 billion and the lowest surplus since June 2017. There are no US events on the schedule.

With the ECB on its way to phasing out its asset-purchase program, the markets are focusing on the timing of a rate hike. After years of monetary stimulus to boost the eurozone economy, the ECB plans to trim its monthly purchases from EUR 30 billion to 15 billion in September, and wind up the program in December. Any clues of a change in monetary policy are bound to affect the euro, as the ECB has not raised rates since 2011. Many analysts are predicting a rate hike in the second half of 2019. However, growing global trade tensions could put a wrinkle in plans to raise rates. The European Commission and the International Monetary Fund have lowered 2018 growth forecasts for the eurozone and for Germany. If the tariff slugfest continues, the euro will likely continue to lose ground.

Trade tensions between the U.S and its major trading partners have raised serious concerns not just with investors, but with Federal Reserve policymakers as well. The Federal Reserve Beige Book for July, released on Wednesday, was rife with references to ‘tariffs’. This trend started in the April Beige Book after President Trump threatened in March to impose tariffs on China. Most of the twelve Fed regional districts referred to tariffs in their individual reports, which make up the Beige Book. Some Fed policymakers have also voiced their concern over the impact that tariffs could have on the U.S economy and is an issue the Fed will have to take into consideration, as it mulls over rate policy for the next six months.

Yuan’s fall extends to a fourth straight day

EUR/USD Fundamentals

• 2:00 German PPI. Estimate 0.3%. Actual 0.3%

• 4:00 Eurozone Current Account. Estimate 27.2B. Actual 22.4B

Open: 1.1642 High: 1.1674 Low: 1.1626 Close: 1.1645

EUR/USD Technical

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

• 1.1637 is fluid. Currently, it is a weak support line

• 1.1728 is  the next line of resistance

Further levels in both directions:

• Below: 1.1553, 1.1434 and 1.1312

• Above: 1.1637, 1.1728, 1829 and 1.1910

• Current range: 1.1553 to 1.1637