EURUSD Muted Ahead of US Durable Goods

Fundamental analysis of Forex market

After declining 0.4% across the previous week, EUR/USD is holding steady in early trade on Monday. Optimism over a US – China trade deal has had a limited effect on the currency pair which has barely moved at the start of the holiday shortened week.

Eurozone economic data has been a mixed bag of late. On the one hand there have been some signs of the slowdown bottoming out. However, the weaker manufacturing PMI and softer consumer confidence reported last week show that weak growth could remain a reality across the winter months.

Inflation remains lacklustre at 1% and incomes continue to increase at a reasonable pace so households should be in a better position to increase spending. However, uncertainty is still weighing on confidence for now meaning that consumer confidence, consumer spending Q4 growth could all advance at a snail’s pace across the start of 2020.

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US – China trade tensions dissipating should start to offer support to the German economy and the common currency. Signs that the US and China are close to signing the agreed deal would boost hopes of a recovery in the trade reliant German economy.

Dollar looks to US durable goods data

The dollar moved higher at the end of last week following encouraging data. GDP grew at 2.1% yoy in Q3 as forecast – personal consumption was notably strong. PCE inflation beat expectations as did US consumer confidence.

An absence of relevant EZ data means US dollar dynamic will act as key driver of movement for EUR/USD.

Up Next

US durable goods orders could produce opportunities later today. Solid growth of 1.5% is forecast during the month. Core durable goods are expected to record just 0.1% growth.

The Fed are currently neutral in their stance. For the Fed funds to shift higher, stronger growth in the US economy is needed. Durable goods is an important indicator.

Levels To Watch:

EUR/USD remains capped on the upside by $1.11. The pair trades below the 50 & 100 sma and is supported by 200 sma around $1.1066. A break above $1.11 could revive the uptrend bringing $1.12 into target. A break through $1.1060 could open the door to $1.1040.