- The US trade balance shows a widening of the deficit, which is a headwind for the dollar.
- Factory Orders in Germany kept the euro afloat amid a gloomy outlook.
- The December meetings of the Federal Reserve and the European Central Bank will keep the pair in known ranges.
- EUR/USD Price Analysis: Trending up, but pullback towards 1.0400 expected.
The euro (EUR) is extending some of its losses from Monday against the US dollar (USD), stuck below 1.0500 amid risk aversion momentum, as data releases in the United States (US) failed to support the USD . Factory orders in Germany surprisingly beat estimates, supporting the euro. Therefore, the EUR/USD pair is trading at 1.0487 after hitting a daily low of 1.0475.
The US Trade Balance deficit widened and could weigh on fourth-quarter GDP
Wall Street will open lower, with a grim environment. The United States Department of Commerce (DoC) revealed the trade balance for October, which showed a widening of the deficit for two consecutive months, since the figures were 78.2 billion dollars, exceeding estimates of 80 billion, although behind the 74.100 million dollars of September. In terms of data, exports rose by $256.6 billion, below the September data, while imports increased by $334.8 billion, up from $332.6 billion the previous month.
German factory orders boosted the euro
In the euro zone, Germany released its Factory Orders for October, which rose 0.1% above estimates and pulverized the September figures. It should be noted that orders grew for the first time since July. Compared to October 2021, orders fell an adjusted 3.2%. Report that companies continue to have difficulties in fulfilling their orders due to the interruption of supply chains, blamed on the war in Ukraine and the distortions caused by the Covid-19 crisis.
US jobs data and strong ISM Services PMI keep USD higher
Elsewhere, the EUR/USD pair has been unable to rally towards the multi-month highs at 1.0594 due to strong US Non-Farm Payrolls (NFP) data for November last week, in the that companies hired more than 263,000 jobs, exceeding estimates of 200,000 jobs. In addition, average hourly earnings rose to 5.1% yoy, and Monday’s release of an upbeat US Institute for Supply Management (ISM) Non-Manufacturing PMI at 56.5 vs. estimates of 53.3 will keep the dollar trending higher.
Meetings of the Federal Reserve and the European Central Bank are coming up.
Against this background, investors estimate that the US Federal Reserve (Fed) will continue to tighten monetary conditions. The odds in money market futures for a 50 basis point increase in the Federal Funds Rate (FFR) at the December meeting stand at 79.4%, while the odds for a 75 basis point increase are stand at 20.6%. As for the European Central Bank (ECB), some policy makers such as Villeroy, Makhlouf and Herodotou expressed their support for a 50 bp rate hike, contrary to Knots and Holtzman, who backed an aggressive 75 bp hike.
EUR/USD Price Analysis: Technical Perspective
The EUR/USD daily chart suggests that the pair is still biased to the upside, but is losing some momentum as Monday’s candlestick printed an inverted hammer, which usually comes at the end of an up/down trend. Since Monday, the Relative Strength Index (RSI) points lower, while the Rate of Change (RoC) shows that sellers are losing momentum. Therefore, EUR/USD could pull back before resuming its uptrend.
The first support for EUR/USD would be the December 5 low at 1.0480, followed by 1.0400 and the 200 day EMA at 1.0388.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
