Market Overview

Bulls Are Breaking Down EUR/USD On Data-Packed Friday

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  • EUR/USD is consolidating the losses following the upbeat US GDP.
  • A busy day awaits traders, with the ISM Manufacturing PMI standing out.
  • The technical picture is becoming bearish.

EUR/USD is cooling from the highs as markets continue digesting the upbeat US GDP that came out at 2.6% annualized. The world's largest economy defied concerns partially stemming from the disastrous retail sales report for December. EUR/USD has knocked off the three-week highs it had reached earlier.

EZ data - inflation eyed

Retail sales were probably a false alarm also in Germany. The latest data for January shows a leap of 3.3% after an upwards revised slide of 3.1% in December. The news from the old continent's largest economy helped the pair stabilize.

The German data kicks off a busy day of data at the wake of March. Markit's Manufacturing PMIs for the old continent are somewhat mixed leaving the focus on the preliminary inflation data.

The European Central Bank will receive a slight acceleration in inflation, expected at 1.5% after 1.4% in December, with mixed feelings. While it is closer to the target, the projected increase is likely fueled by rising oil prices. Core CPI is projected to remain unchanged at 1.1%.

The unemployment rate is forecast to remain unchanged at 7.9% in the 19-country currency bloc.

US data: after GDP, looking towards the NFP

Moving to the US, the Federal Reserve's preferred measure of inflation, Core PCE, will likely remain unchanged at 1.9% YoY, a touch below the 2% target. Personal Income and Personal Expenditures are also of interest, but the primary event of the day is the ISM Manufacturing PMI.

The forward-looking survey bounced from the lows in December and pointed to more robust growth in January. The figure for January is not only a gauge of the sector but also serves as a hint towards next Friday's all-important Non-Farm Payrolls report.

China looking better

Apart from data on both sides of the Atlantic, markets are content with the recent murmurings around the US-Sino trade talks. White House Adviser Larry Kudlow expressed optimism on reaching a "historic accord", a stark contrast from USTR Robert Lighthizer's hawkish tone on the talks. The mood also improved on data from China, as the independent Caixin PMI beat expectations with 49.9 points.

Fed Chair Jerome Powell made a third public appearance this week, reiterating that the "US economy is in a good place." The powerful central banker is in no rush to raise rates despite the optimism.

All in all, data is in the limelight for a change, but reports from the trade talks, and perhaps Brexit news can steal the show.

EUR/USD Technical Analysis

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EUR/USD is on the verge of dropping off the 50 Simple Moving Average on the four-hour chart, after slipping below the 200 SMA. Another bearish sign comes from Momentum which has turned negative. 

Support awaits at 1.1345 which provided support in late February. 1.1330 and, more importantly, 1.1315, provide further support after they cushioned the pair earlier last month. 1.1295 and 1.1275 served as support lines beforehand. 

Resistance awaits at 1.1372 which worked as a double top before EUR/USD broke higher. 1.1385 and 1.1405 capped the pair in recent days on its way up. 1.1420 is the three-week high set on Thursday. 1.1430 and 1.1450 are next.

Posted-In: European UnionNews Eurozone Forex Global Federal Reserve Markets General

 

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