The euro finished the day lower against the US dollar yesterday despite an optimistic European Central Bank (ECB) statement. EURUSD traded lower from an intraday high of 1.1153 to bottom at 1.1102. By the end of the New York session, the currency pair had settled at 1.1126, which is 1 pip shy of its opening price.
As expected the ECB did not announce any changes to its official cash rate. Interest rates in the euro zone are still flat at 0.00%. ECB President Christine Lagarde highlighted the need to keep stimulus in place as the economy continues to be vulnerable. However, she did express her optimism by saying that risks to euro zone growth are now lesser and that core inflation seems to be moving in the right direction. In fact, the central bank even upgraded their economic growth and inflation forecasts. GDP is now eyed to print at 1.2% in 2019 which is 0.1% higher than their September forecast. Meanwhile, inflation was upwardly revised by 0.1% for 2020.
Euro Rallies on Prospect of a Brexit Plan
Earlier in today’s Asian session, the euro looks to have benefitted from news that the Conservatives are on their way to secure majority in the United Kingdom general election 2019. Remember that Brexit does not only bring uncertainty to the UK but also to the countries trading partners like the euro zone.
US Retail Sales Due Today
For today, EURUSD will likely take its cue from economic reports and updates on the ongoing trade negotiations between the US and China.
At 7:00 am GMT, Germany’s whole price index is eyed to show that prices were up by 0.5% in November. Then at 1:30 pm GMT, the retail sales report from the US is due. It is expected to print at 0.5%. However, the core reading which excludes volatile and big-ticket purchases is seen to come in at 0.4% in November. Better-than-expected figures could be bullish for the dollar as they would indicate that the recent uptick in job growth has translated to a pick up in consumer spending.
US and China to Announce a Trade Deal Before December 15?
You should also keep an ear out for updates on negotiations. Recent reports have suggested that additional tariffs which are supposed to be implemented by December 15 may no longer push through. On top of that, existing tariffs could also be rolled back. As for China, the country has supposedly agreed to purchase 50 billion US dollars worth of agricultural goods. We have yet to hear an official statement from either side. If these details are confirmed, we could see risk appetite pick up in today’s session.
On the 4-hour chart, it looks like EURUSD has retraced some of its gains to the 23.6% Fib level (when you draw the Fibonacci retracement tool from yesterday’s low at 1.1102 to this Asian session highs at 1.1197). This area also coincides nicely with a previous string of highs established on October 21, October 31, and November 4. Reversal candles at this level could hint that the currency pair is priming for a rally beyond today’s highs around 1.1210 where the falling trend line seems to be on the daily time frame (connecting the highs of January 10 and June 25).If there are enough buyers in today’s trading, we could see EURUSD break resistance at the trend line. It may then head to its June 2019 highs at 1.1410. On the other hand, if support at the 23.% Fib does not hold today, EURUSD could fall to around 1.1110 where it started its last rally.