EUR/USD has edged upwards on Friday, as the pair trades at the 1.06 line. US markets were closed on Thursday for Thanksgiving and trade will likely remain light until next week. On the release front, there are no major events out of Europe or the US.
The stunning US election results caused turmoil in global markets, and there has been concern that the Eurozone economy could be negatively affected by Trump’s victory.
So far, however, recent Eurozone and German indicators have been solid. Germany business confidence levels remain high, as underscored in the November Ifo Business Climate report. The index continues to hover around the 110 level, pointing to strong optimism about the German economy.
This report is the first look at the German business sector’s reaction to the Trump election victory, and the reading appears to show that German companies are not worried about the US election results. However, the ECB Financial Stability Review was less sanguine.
The report warned about the risk of sudden corrections in global markets due to “higher political uncertainty”, which could hurt economic growth. The report didn’t give examples, but it’s a good bet that the report was referring to the Brexit vote and Donald Trump’s election as president.
With Brexit negotiations expected to start shortly and Trump taking over as president in January, we could see plenty of volatility from the euro in the coming weeks. The euro remains under pressure and dropped down to 1.0517 on Thursday, its lowest level since November 2015. EUR/USD is down 3.3 percent in November, and there is growing talk of the euro dropping to parity with the high-flying US dollar.
ECB Warns of Political Risks to Financial Stability
The Federal Reserve appears poised to raise interest rates by a quarter-point in December, with the odds of a rate hike at 93 percent. The Fed minutes were released on Thursday, indicating that policymakers felt it appropriate to raise rates “relatively soon”.
Some members argued that the Fed needs to raise rates in December in order to preserve the bank’s credibility – despite some broad hints of rate hikes during 2016, the Fed has stayed on the sidelines throughout 2016, causing significant disappointment and frustration in the markets.
The US dollar posted sharp gains against the euro on Wednesday, bolstered by excellent durable goods reports. Core Durable Goods Orders rose 1.0%, well above the estimate of 0.2%. Durable Goods Orders surged 4.8%, crushing the estimate of 1.2%.
These strong numbers point to a welcome improvement in business investment, and strong consumer fundamentals could see business spending numbers continue to improve. There was also positive news on the consumer front, as the UoM Consumer Sentiment index climbed to 93.8, above the forecast of 91.6.
EUR/USD Fundamentals
Friday (November 25)
- 5:00 Italian Retail Sales. Estimate 0.0%
- 8:30 US Goods Trade Balance. Estimate -59.2B
- 8:30 US Preliminary Wholesale Inventories. Estimate 0.3%
- 9:00 German Ifo Business Climate. Estimate 110.6. Actual 110.4
- 9:45 US Flash Services PMI. Estimate 54.9
*All release times are GMT
* Key events are in bold
EUR/USD for Friday, November 25, 2016
EUR/USD November 25 at 8:50 GMT
Open: 1.0559 High: 1.0615 Low: 1.0538 Close: 1.0599
EUR/USD Technical
| S1 | S2 | S1 | R1 | R2 | R3 |
| 1.0287 | 1.0414 | 1.0506 | 1.0616 | 1.0708 | 1.0821 |
- EUR/USD was flat in the Asian session and has posted small gains in European trade
- 1.0506 is providing support
- 1.0616 remains a weak resistance line
Further levels in both directions:
- Below: 1.0506, 1.0414 and 1.0287
- Above: 1.0616, 1.0708, 1.0821 and 1.0957
- Current range: 1.0506 to 1.0516
OANDA’s Open Positions Ratio
EUR/USD ratio is unchanged in the Friday session. Currently, short positions have a majority (65%), indicative of trader bias towards EUR/USD reversing directions and moving to lower ground.