Top Story

EUR/USD in the crosshairs ahead of busy week

On Monday, EUR/USD pulled back further from its new 3-year high above 1.2500 that was just established late last week. This pullback was driven in large part by a rebound for the US dollar on Monday, which followed the greenback’s sharp plunge for much of the past three weeks. Looking ahead to the current week’s busy schedule of economic data and events from both the eurozone and the US, EUR/USD is likely to be significantly impacted.

Last week, aside from the sharp plunge for the US dollar that was driven in part by remarks made by US Treasury Secretary Mnuchin at the World Economic Forum in Davos, Switzerland, the euro was also boosted by an unexpectedly more hawkish European Central Bank. Although the ECB kept interest rates on hold as expected, there was increased optimism in ECB President Mario Draghi’s comments, even despite prior expectations that Draghi would attempt to talk down the high-flying euro.

This week out of the eurozone, key releases will include: preliminary flash GDP for the fourth quarter of 2017 (Tuesday, +0.6% expected) and CPI flash estimate year-over-year (Wednesday, +1.3% expected).

From the U.S., events that will dominate the schedule will include the first FOMC meeting of the year concluding on Wednesday, followed by the monthly US jobs report on Friday. The Federal Reserve is not expected to raise interest rates or make any substantive changes to monetary policy on Wednesday at the conclusion of its two-day meeting, but the Fed’s comments and outlook, as usual, will likely set the tone for monetary policy going forward into 2018. As for the jobs report, current expectations are hovering around 185K jobs added in January, after the relatively disappointing 148K jobs added in December.

Also out of the U.S., President Trump will be delivering his first State-of-the-Union address to the nation on Tuesday night, which could make a significant impact on the dollar. Rounding out the week for the greenback will be US ADP private jobs data on Wednesday (around 190K added jobs expected for January) and US ISM manufacturing PMI on Thursday (59.0 expected for January).

From a technical perspective, EUR/USD continues to trade within strong short-term and long-term uptrends. The key breakout levels to watch amid the major economic events and releases from the U.S. and eurozone this week include both the 1.2300 level to the downside and 1.2500 level to the upside. Any major breakout above 1.2500 resistance would confirm a continuation of the entrenched uptrend, potentially pushing the currency pair to new multi-year highs, while any sustained breakdown below 1.2300 support could then seek its next downside target around the 1.2100 support area.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.