Eurusd falls as US economic data shows mixed outlook and Germany sees slight improvement in business sentiment

EURUSD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.26%	-27.5 Pips
Week to-date	-0.37%	-39.2 Pips
January	0.21%	22.2 Pips

Upcoming key events (London Time)

Wed 07:00 PM USD Fed Interest Rate Decision (Federal Funds Rate)
Thu 09:00 AM EUR GDP (3-mth)
Thu 10:00 AM EUR GDP (seasonally adjusted) (3-mth)
Thu 01:15 PM EUR ECB Interest Rate on main refinancing operations (MRO)
Thu 01:15 PM EUR ECB Interest Rate on deposit facility
Thu 01:30 PM USD GDP annual rate

What happened lately

In the United States, the latest data reflected a mixed economic scenario. The House Price Index for November showed a decrease to 0.3%, marking a slight decline from the previous months of October’s figures. Another significant pointer comes from the U.S. durable goods new orders, which saw a notable drop to -2.2% in December from -1.1% in November. However, durable goods orders excluding transportation saw a modest uptick of 0.3%. A decline was noted in nondefense capital goods orders minus aircraft, which decreased from 0.9% in November to 0.5% in December. On a slightly positive side, new-home sales for December registered an increase of 3.6%, although this pointed to a slower growth compared to 5.9% in November. Together, the data highlights both challenges and areas of resilience within the U.S. economy amid fluctuating durable goods orders and tempered growth in the housing market.

In Germany, the ifo indexes provided insights into the business sentiments and economic health as of January. The ifo Business Climate Index edged upwards from 84.7 points in December to 85.1 points in January, showcasing a positive movement. Meanwhile, the ifo Current Assessment rose from 85.1 to 86.1 points. Yet, despite these improvements, expectations decreased slightly from 84.4 to 84.2 points. This combination of data from Germany suggests a cautiously optimistic outlook, where the current economic conditions seem to have improved, but future economic expectations remain slightly dampened.

The recent economic releases could have varied impacts on the EURUSD exchange rate. The U.S. economic data, featuring declining durable goods orders and a decrease in housing market gains, adds pressure to the U.S. dollar. Conversely, the slight improvements in Germany’s business climate and current assessment indices may uplift sentiment for the euro. Nonetheless, external upcoming events such as the Fed’s interest rate decision and ECB’s policy decision will also play crucial roles. These anticipated events are likely to produce volatility in the EURUSD pair as traders assess potential impacts on monetary policy divergences and economic outlooks across the US and Eurozone. The impact would be contingent on market expectations and investor interpretations regarding policy directions decided in these central bank meetings.

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What can we expect from EURUSD today?

EURUSD on Tuesday dropped -0.26% to 1.04284. Price is above 9-Day EMA while Stochastic is falling.

Updated daily direction for EURUSD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 1.04091 with break below could see further selling pressure towards S2 at 1.03898. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 1.04565 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 1.04135 would indicate selling pressure.

For the week to-date, take note that EURUSD is mixed as compared to the prior week.

Key levels to watch out: