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EURUSD Starts 2020 in the Red Despite Positive PMIs


EURUSD began to pare some of its gains from its Santa Claus rally yesterday. The currency pair steadily dropped after peaking at 1.1223 during the Asian market session. It bottomed at 1.1162 before finally settling at 1.1170 by the New York session close.

Euro Zone PMIs Generally Positive

Yesterday’s roster of PMI reports from Europe were generally positive. Only the Italian manufacturing PMI for December missed forecasts when it printed at 46.2 versus the 47.3 consensus. Meanwhile, Spain’s manufacturing PMI topped the market’s 46.9 estimate when it printed at 47.4. The French manufacturing PMI also came in better than expected at 50.4 versus the 50.3 forecast. As for Germany’s manufacturing PMI, it beat the market’s 43.4 estimate at 43.7. Lastly, the euro zone-wide final manufacturing PMI for December was at 46.3, higher than the consensus at 45.9.

However, it’s worth noting that these reports are considered as third-tier data and rarely move the market.

For today, there are a couple of catalysts that you will need to watch out for if you are trading EURUSD.

Economic Data Due for EURUSD Today

First, we have another handful of data coming from the euro zone. At 7:45 am GMT, the German and French preliminary CPI data for December are due. They are expected at 0.4% and 0.3%, respectively. Then at 8:55 am GMT, Germany’s unemployment change report for November is eyed to show that only 3,000 people did not find jobs during the month.

Later today, market-moving data from the US are due. The ISM manufacturing PMI for December is seen to print at 49.0 at 3:00 pm GMT. Then at 7:00 pm GMT, the minutes of the most recent FOMC meeting is due.

Better-than-expected euro zone data, disappointing US numbers, and a dovish Fed could help the euro rally. On the other hand, worse-than-expected euro zone figures, positive US reports, and a hawkish Fed could exacerbate its slide.

Risk Aversion in Today’s Asian Session

You should also take into consideration reports about the US launching a missile attack on Baghdad. Earlier in today’s Asian session, risk aversion dominated market sentiment on concerns that this move would increase tensions between the US and Iran. It also did not help that North Korea warned of a potential attack. Risk aversion is usually bearish for the euro and could fuel a sell-off on EURUSD.

Read our Best Trading Ideas for 2020.

EURUSD Outlook

On the hourly time frame, you can see that EURUSD has been steadily trending lower–pulling back before making new lows. If you connect the currency pair’s most recent highs, you will see that the area around 1.1190 has a confluence of resistance and could be a good entry price for a sell. For one, it aligns with the falling trend line. Secondly, the 100 SMA coincides with the price. You will also see that this is where the 61.8% Fib level is when you draw the Fibonacci retracement tool from EURUSD’s New York session highs to its lows. Reversal candles around this price could mean that the currency pair may soon fall to its December 23 lows at 1.1067. If there are not enough buyers in the market, a bearish close below today’s Asian session lows may mean that we won’t see a pullback anymore.

On the other hand, a bullish close above the resistance area could mean that EURUSD is on its way up to its December 31 highs at 1.1238.

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