By Kenny Fisher
EUR/USD continues to move higher and has posted slight gains in the Friday session. Currently, the pair is trading at 1.0650. On the release front, German inflation numbers were strong, as WPI jumped 1.2%, well above the forecast of 0.3%. In the US, we'll get a look at retail sales, inflation, and consumer confidence numbers. Traders should be prepared for some volatility in the North American session.
The US economy is in very good shape, and the markets are expecting strong numbers from retail sales and the UoM Consumer Sentiment report. The employment picture is bright, as unemployment claims beat expectations for a second straight week. However, it should be noted that unemployment rolls may be skewed around the Christmas holiday season, so analysts are not reading too much into these unusually low releases.
Still, 4-week averages for unemployment claims remain at very low levels, as the employment markets remain close to capacity as a strong US economy has led to demand for more workers. If the US economy continues to heat up, the Fed will likely step in and hike rates. On Thursday, FOMC member Patrick Harker took note of the strong US economy and projected three "modest" rates from the Fed in 2017.
More Trump, more theatrics. There was an air of anticipation ahead of Donald Trump's press conference on Wednesday, but the event quickly turned into a spectacle rather than a platform outlying the president-elect's plans as president. The markets were hoping to hear some specifics about Trump's economic policy, but the president-elect didn't outline any plans regarding the economy. Instead, Trump focused on attacking the media for releasing damaging material on him, and also presented his plan to avoid business conflicts while in office. The markets were clearly disappointed and the US dollar responded with broad losses.
During the recent presidential campaign, Trump had plenty to say about the ills of the US economy on the campaign trail, but was short on solutions. He has gone on record promising tax cuts and significant fiscal spending to repair the country's infrastructure. This has led to expectations of reflation in the US, after years of low inflation levels.
What does this mean for the currency markets? Lower taxes and higher spending (assuming both can be done simultaneously), would boost the US economy and raise inflation levels. This would likely lead to further rate hikes, which is bullish for the US dollar. The greenback has impressed since the US election, with EUR/USD falling 3.7 percent.
Friday (January 13)
- 00:00 Federal Reserve Chair Janet Yellen Speech.
- 7:00 German WPI. Estimate 0.3%. Actual 1.2%.
- 13:30 US Core Retail Sales. Estimate 0.5%.
- 13:30 US PPI. Estimate 0.1%.
- 13:30 US Retail Sales. Estimate 0.5%.
- 13:30 US Core PPI. Estimate 0.3%.
- 14:30 US FOMC Member Patrick Harker Speech.
- 15:00 US Preliminary UoM Consumer Sentiment. Estimate 98.6.
- 15:00 US Business Inventories. Estimate 0.3%.
- 15:00 US Preliminary UoM Inflation Expectations.
*All release times are GMT
*Key events are in bold
EUR/USD for Friday, January 13, 2017
EUR/USD January 13 at 10:00 GMT
Open: 1.0594 High: 1.0665 Low: 1.0571 Close: 1.0648
- EUR/USD was flat in the Asian session and has posted slight gains in European trade.
- 1.0616 is providing weak support.
- 1.0708 is the next resistance level.
Further levels in both directions:
- Below: 1.0616, 1.0506, 1.0414 and 1.0287.
- Above: 1.0708, 1.0873 and 1.0985.
- Current range: 1.0616 to 1.0708.
OANDA's Open Positions Ratio
EUR/USD ratio is showing little change in the Friday session. Currently, long positions have a slim majority (52%), indicative of very slight trader bias towards EUR/USD continuing to climb higher.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.