EURUSD Movement
On Friday, EUR declined 0.67% against the USD and closed at 1.3525.
The release of the uninspiring construction output data from the Euro-zone weighed on the common currency. According to the Eurostat, construction output in the Euro-zone dropped 0.6% on a monthly basis in November, following a revised decline of 1.1% recorded in the preceding month.
In news from the periphery, Moody’s Investors Service upgraded Ireland’s government debt ratings to Baa3 from Ba1 and changed the outlook to positive. However, the S&P rating agency slashed Portugal’s rating to BB negative from BB, while placing the country on negative watch as policy uncertainty remains.
Moreover, the ECB Governing Council member, Klaas Knot cautioned that the current unsatisfactory economic situation in the Euro-zone should not give rise to excessive pessimism.
The US Dollar gained momentum after upbeat data released from the US, reinforced views that the Federal Reserve would scale back its stimulus program substantially by the end of this year. Meanwhile, the US Census Bureau and the Department of Commerce (DOC) indicated that the housing starts in the US dropped 9.8% (MoM) to a seasonally adjusted annual rate of 999,000 units in December, exceeding economists’ forecast for 990,000 starts in December. Furthermore, building permits in the US decreased 3.0% (MoM) to a rate of 986,000 in December, from a revised 1,017,000 pace reported in November. Separately, the industrial production in the US increased 0.3% (MoM) in December as anticipated, the strongest rise in three years and as compared to a revised gain of 1.0% reported in the previous month. Additionally, manufacturing production advanced 0.4% in December as compared to a rise of 0.6% recorded in the previous month. Meanwhile, capacity utilisation rose to 79.2% in December, from a revised capacity utilization of 79.1% recorded in November.
On the flipside, the Reuters/University of Michigan revealed that the consumer sentiment index in the US unexpectedly declined to a level of 80.4 in January, from a level of 82.5 reported in the previous month. Market had anticipated the index to rise to a reading of 83.5.
On Friday, the Richmond Fed President, Jeffrey Lacker stated that the central bank would definitely discuss further reductions in its bond-buying program at upcoming meetings, provided the labour market shows signs of sustained improvement.
In the Asian session, at GMT0400, the pair is trading at 1.353, with the EUR trading marginally higher from yesterday’s close.
The pair is expected to find support at 1.3484, and a fall through could take it to the next support level of 1.3438. The pair is expected to find its first resistance at 1.3599, and a rise through could take it to the next resistance level of 1.3668.
Going forward, this week investors have their hands full, with a host of economic releases from the Euro-zone, including the ZEW sentiment indices, the PMI numbers and consumer confidence. Meanwhile, in the US, the crucial housing data, PMI and jobless claims data would keep investors on their toes.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
