EUR/USD consolidates around 1.1900 mark in wake of US data dump

EUR/USD is trading marginally higher on Wednesday, up slightly less than 0.1% or just under 10 pips, as USD conditions remain somewhat soft. The pair is off 1.1930 highs and dipped as low as 1.1880 at one point, but the pair now trades close to the psychological 1.1900 mark.

EUR/USD shrugs off US data dump

A mixed batch of US macro data just came out at 13:30GMT; weekly jobless claims were abysmal, with 778K first time unemployment in the week ending on 21 November, the largest weekly increase in five-week, an increase on the week prior’s 742K reading and higher than expectations for a drop to 730K. Increased lockdown restrictions across the country to contain rising virus numbers is clearly taking its toll on the labour market, something that is bound to add to/confirm FOMC member fears.

However, the week jobless data was seemingly offset by much stronger than anticipated Durable Goods Orders numbers for October; headline and core durable goods orders rose 1.3% MoM on the month (above expectations for a rise of 1.0% and 0.5% respectively). Meanwhile, the second estimate of Q3 GDP was pretty much bang in line with expectations at 33.1% QoQ (annualised), while the US Goods Trade Balance for October showed the country in a large deficit, as expected, of -$80.29B, hardly changed from the month before.

More recently, Core PCE inflation data for October, released at 15:00GMT, saw MoM price growth underwhelm at 0.0% versus expectations for a rise of 0.1%. Meanwhile, October personal income and spending numbers were mixed, with the former dropping 0.7% on the month (against expectations for a 0.1% rise), while spending beat expectations with a 0.5% MoM rise (expectations were for a 0.4% rise).

The reaction in EUR/USD has been muted; the pair continues to trade within intra-day ranges and has managed to hold above the 1.1900 mark. Though unable to surpass 10 September and 9 November highs around 1.1920 for long, the pair remains broadly underpinned by increasingly unfavourable USD conditions; risk appetite is being supported by vaccine optimism, (negative for safe havens like USD) as well as the fact that the US economy seems to be doing better than expected in Q4, but not by enough (see Wednesday’s US jobs data) to allay FOMC concerns regarding the difficult incoming winter during which time the Covid-19 outbreak is expected to continue to hurt the recovery. That might sound like a negative, but if it means more accommodation from the Fed (perhaps via an expanded QE programme in December), then this is likely to be net USD negative.

Anything USD negative is good for EUR/USD, broadly speaking, hence why the pair has managed to recover back towards 1.1900 from just above 1.1800 lows set on Monday.

EUR/USD’s rally has ignored some more negative factors relating to the state of politics in the EU; the bloc still has no deal on its ambitious Recovery Fund or 2021-2027 budget, although the EU budget commissioner said on Wednesday that the EU is working with Poland and Hungary to remove their veto continues.

Meanwhile, a more downbeat tone to Brexit news on Wednesday (one BBC report suggested that talks are not going well and the French Foreign Minister called British overtures insufficient) is weighing on GBP a little but has hardly affected EUR at all. If the likelihood of a no-deal end to the UK’s transition period away from the EU ends without a deal, this ought to weigh on EUR vs USD, even if it does boost EUR vs GBP, given the high exposure of Eurozone exports to the UK market.

EUR/USD stabilises above recent range, eyes sustained push back to three-month highs

Late in the US session on Tuesday, as well as during the early part of the Asia Wednesday session, EUR/USD rallied above its recent 1.1815-1.1895ish range. Then, as European market participants arrived at their desks on Wednesday, the pair rallied to fresh three-month highs of 1.1930 (above the 10 September and 9 November highs at 1.1919).

However, the upside momentum has since waned, and EUR/USD is trading back around the 1.1900 level again and seems to be struggling for direction.

To the downside, the top of the pair’s recent 1.1815-1.1895ish range has been offering solid support. If this level goes, the door is thus opened for a gradual move lower to the bottom of this range.

To the upside, if EUR/USD can recover back to highs of the day at 1.1930 and beyond, the main levels to watch will be the 18 August high at 1.1866 and then the key 1.2000 level, which comes just ahead of year-to-date highs at 1.2011.

EUR/USD eight hour chart