Further weaker data from Europe prompts reflection on today's appreciation of the Eurodollar, which is benefiting more from positive market sentiment and a slightly weaker dollar than from hard economic data; EURUSD gains 0.15% today; US bond yields rise slightly by 2.5 bps, above 4.2%. However, volatility on the pair may accelerate today before noon and around 2:30 pm, when the market will evaluate data from the Eurozone and the US.
- Sentiment around EURUSD was supported today by an unexpected, higher-than-forecast increase in German factory industrial orders, which for November rose at an annual rate of 5.7% vs. the expected 1.8% y/y. On a monthly basis, however, we still see a -1.5% decline, but a deeper -2% was expected. France's industrial roduction, on the other hand, fell -0.1% in November, although a 0.3% rebound was expected, after a -0.9% decline previously. Construction PMIs also fared badly, with the reading for Germany indicating 38 versus 42 previously.
- If the U.S. data does not perform very strongly, against Europe, and the gap narrows, however slightly, a rebound above 1.06 and a further test of sentiment would be possible. However, Powell's statements yesterday suggest that the Fed will not be in a hurry to cut rates in 2025, while the ECB is in the opposite position; and according to recent statements by ECB officials, rates in Europe could fall below neutral. As a result, it may be difficult to change the trend on EURUSD, and the difference in US vs. European yields in 2025 is likely to speak against the Eurodollar.
EURUSD (D1 interval)
Now investors await retail sales data from the Eurozone (10 AM GMT), which is expected to fall -0.3% m/m vs. 0.5% growth previously; on an annual basis, it rose 1.7% vs. 2.9% in September. Volatility on the pair may also be elevated around 2:30 pm when we will learn about US benefit claims and the trade balance. Looking at the EURUSD chart, we see that after the bottom breakout, the pair is testing the lower range of the downward price channel; within the framework of a 1:1 correction pattern. The rebound in recent days took place on relatively low volume.
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Source: xStation5
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