• The single currency closed at 1.1315. The important resistance level placed between 1.1340-1.1360. Barring NOK and SEK, strength was visible among all the euro crosses overnight.
  • Analysts are downgrading the bets towards eurozone and in rest of the world economic growth numbers. US-China trade war, local political uncertainty, and tighter financial conditions will continue to pose headwinds to growth.
  • We expect the PMIs have continued to decline across the eurozone, especially Italy with the weak business sentiment across the EZ.

Data review:

  • Germany Q4 GDP remained stable at 0.0% on its previous quarter
  • EA industrial production down by 0.9% in Dec 2018 compared with Nov 2018, according to estimate from Eurostat.
  • EA GDP rose by 0.2% during the fourth quarter of 2018, according to the flash estimate by Eurostat. On YoY, the EA GDP rose by 1.8%. in 2018 compared to 2.4% in 2017.

PIMCO downgraded eurozone GDP for 2019. “Rising risks and political unrest is weighing on investor sentiment in Europe,” Economist said in a note. They also expect “eurozone GDP to slow to a below-consensus 1.0%–1.5% range in 2019”.

Data preview:

Central Banks monetary policy meeting minutes (ECB and FOMC) among top-tier data/events to keep forex traders busy. We will see PMIs for EA likely to decline further.

In January meeting, FOMC and ECB echoed dovish, based on these this week’s FOMC and ECB minutes are in focus. “Market participants will try to assess the reasons behind the significant change in language”, Barclays said in a note.

However, the policy divergence and the technical landscape advocating bearish EURUSD.

TECHNICAL OVERVIEW

Last week, we forecasted that EURSUD would rebound to 1.1300 and 1.1330 and the price traded inline with our forecast and traced out a double top at 1.1339.

Now the daily RSI being in recovery mode, watch out for new rebounds again towards the resistance levels around 1.1340-1.1365 before those around 1.1400 its 100MA and 1.1445, December 10 high.

Overnight, the single currency surpasses the long-legged Doji reversal (usually could occur in a strong uptrend or downtrend, in this case, occurred on a downtrend) generated on Friday but shy at the key resistance at 1.1340. It seems the market is approaching a transition period.

There will need to be a breakout above the key resistance levels (1.1340-1.1360) to envisage an extension of the pair’s ascent towards 1.1400 its 100MA and even the resistance at 1.1440.

Supports are located at 1.1290, 1.1250 and 1.1200.

Turning to the medium term, the overall trend remains bearish. As long as 1.1570 serving as resistance, watch out for a new leg down to 1.1000. Moreover, the 200MA (Weekly) has been serving support since mid-August 2018 has not turned to resistance at 1.1335.

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

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