G10 currencies posted strong gains on Monday against the dollar as optimism returns over US-China trade talks.

 This year marks the 20th birthday of the euro. Currently, the euro settle around the purchase power parity against USD at 1.14  when it was introduced.

In forex, EURUSD manages to consolidate of its recent ranges. Besides the USD trading behavior over the past weeks suggests the dollar strength likely to come to an end. As a result, Gold and Silver prices will rise further, and EURUSD is getting ready to shift the gear higher in the coming months.

Data review:

  • Germany new orders in manufacturing had decreased in November 2018 1.0% on the previous month, according to Destatis.
  • Retail trade increased by 0.6% in the euro area (EA19) and by 0.7% in the EU28, according to estimates from Eurostat.

Data preview:

Focus remains on the ongoing US-China talks and FOMC and ECB minutes. On top of these, Fed Powell’s appearance at the Economic Club Luncheon, in Washington DC will be focus firmly. ECB’s first rate hike signal after this summer is the key driver for EURUSD. This week we don’t have any top-tier data for EUR.

On ECB minutes, Nordea wrote in a note, “We look for concessions on either TLTROs or the growth outlook in the Euro area.”

A single hike signal needed from ECB, this could boost EURUSD to 1.20 and 1.23 into the year-end. However, we expect the message could reach us only after 1H 2019. Besides, we also expect the Fed will be in a cautious mood in 2019. Especially we are watching the March Fed meeting more closely, which encounters with the Brexit deadline.

“We expect a 20bp hike in December 2019 by the ECB, driven by wage growth” Danske Bank reported in a note.

TECHNICAL OVERVIEW

We spotted a small ascending triangle pattern on the daily chart (below). Is this a reversal pattern at the end of a downtrend is the key question? In case of a bullish trendline breakout, we could see 1.1560 and 1.1590/1.1600 in the coming days.

The EURUSD has reaffirmed support since November 2018. The price action has been well supported at 1.1215 around its 61.8% fib reaction and 50MA (monthly) and a break below only ONLY may pave the way for lower prices back to 1.10 odd levels.

On the upside, the trend is supportive, but the price action needs to take out the 100MAs at 1.1500 and 20MA (Weekly) to confirm the pattern once again to 1.1600 in the near-term and 1.1800 in the medium term.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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