EUR/USD extends sell-off on robust US retail sales
EUR/USD extends its drops below 1.1300. US retail sales smashed expectations with +0.9% on the control group. French and German PMI's badly disappointed. Markets are concerned about Chinese growth.
EUR/USD latest news
EUR/USD latest analysis
1. Technical Overview
EUR/USD is entrenched in a narrow range. Momentum is going nowhere, and the Relative Strength Index is around 50, fully balanced. The pair is trading slightly below the 50 and 200 Simple Moving Averages on the four-hour chart, a minor bearish sign.
1.1330 was a swing low on Thursday and provides some support. 1.1305 is the bottom of the recent range after supporting EUR/USD twice in past weeks. The November trough of 1.1270 is the next line to watch ahead of the 2018 low of 1.1215.
1.1380 is a minor line of resistance after capping the pair early in December. 1.1400 is already a stronger level of resistance after capping euro/dollar twice. 1.1420 was a swing low early in the month, and 1.1445 held it down more recently.
EUR/USD PRICE SENTIMENT
EUR/USD BULLISH PERCENTAGE INDEX
EUR/USD Pivot points
EUR/USD trading positions
2. Fundamental Overview
EUR/USD is trading in the lower half of the 1.1300 handle, marginally lower. European Central Bank President Mario Draghi said that the balance of risks is moving to the downside, sending the common currency lower. However, the world's most popular currency pair never went too far.
The ECB also formally announced the end of its bond-buying scheme which ran for nearly four years and pledged to reinvest the proceeds from maturing bonds. The Frankfurt-based institution will maintain the 2.6 billion euros balance sheet well beyond the first increase of interest rates, according to the pledge.
Markit's preliminary purchasing managers' indices for France badly disappointed. The Manufacturing PMI fell to 49.7, the services PMI to 49.6. Scores below 50 reflect future contraction. The numbers are worrying.
China remains in the limelight of the global economy, but this time due to economic indicators rather than its trade spat with the US. Growth in industrial output slowed down to 5.4% YoY, and retail sales in the world's second-largest economy decelerated to the lowest levels since 2003. The news weighs on markets and limits any potential gains for the euro.
Italy and the European Commission continue their negotiations over the Italian budget. The sides are reportedly getting closer, but a gap remains. Concerns about a broad French budget deficit have subsided.
The Brexit saga continues with European leaders rejecting a legally binding change in the Irish backstop, and they are willing only to add declarations. The Pound is on the back foot, but it is not affecting the Euro so far.
Later today, the US releases retail sales numbers for November. Consumption is central to the American economy, and the data feed into next week's Fed decision.
EURUSD FUNDAMENTALS TODAY
3. Big Picture
Themes affecting the EUR/USD
Influential Institutions & People for the EUR/USD
The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:
The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is the one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Mario Draghi, member of the Executive Board, is also the President of this organism.
On the other
Mario Draghi is member of ECB's Executive Board and also the President of this organism. His declarations are an important source of volatility, especially for the Euro and the currencies traded against it. Born in 1947 in Rome, Italy, he graduated of the Massachusetts Institute of Technology and became President of the European Central Bank in 2011. Draghi gives press conferences in the back of how the ECB observes the current European economy. His comments may determine positive or negative trends for the Euro in the short-term. Usually, a hawkish outlook is seen as positive/bullish for the EUR, while a dovish one is seen as negative/bearish.
Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2018, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.
ECB NEWS & ANALYSIS
FED NEWS & ANALYSIS
The EUR/USD (or Euro Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.
Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EUR/USD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.
EURUSD YEARLY FORECAST
The GBP/USD (or Pound Dollar) currency pair belongs to the group of 'Majors', a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called 'The Cable', reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.
The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.
The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the 'Majors', the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that's why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.
Trading the USD/JPY currency pair is also known as trading the "ninja" or the "gopher", although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.