As 2018 unfolds the euro lovers rushed to buy the common currency, but failed to elevate above Sep 2017 high. In 2017, the euro rallied 16%, led by the EZ economic growth story. We believe the story likely to continue this year as well, in addition to that euro not yet fully priced for ECB. We also believe in 2018 the ECB policy likely to dominate the Fed.

Chris Williamson, Chief Business Economist at IHS Markit said: A stellar end to 2017 for the Eurozone rounded off the best year for over a decade.

Data review:

  • Spain manufacturing PMI posted 55.8 in December, down slightly from the near 11-year high of 56.1 in November
  • Spain Services PMI ticked up to 54.6 in December from 54.4 in November
  • Italy Manufacturing PMI recorded 57.4 for December vs 58.4 in November
  • Italy Services PMI improved to a level of 55.4 in December from November’s 54.7
  • France manufacturing PMI posted 58.8 in December up from 57.7 in November
  • France Services PMI posted 59.1 in December down from November’s six-and-a-half year high of 60.4
  • Germany Manufacturing PMI climbed to an all-time high of 63.3 in December from 62.5 in November
  • Germany Services PMI climbed to 55.8 in December from 54.3 in November
  • Final EZ Manufacturing PMI at 60.6 in December, its best level since the survey began in mid-1997 according to IHS Markit
  • Eurozone economic growth highest since early-2011, 56.6 in December, up from 56.2 in November

Data Preview: Given the lack of macroeconomic data (high impact), it is understandably a quiet week in the markets. FX participants focus on ECB meeting minutes (Thu).

FX OVERVIEW

The EURUSD bullish theme will continue in 2018 based on the EZ economic growth story and room to price for ECB.

In the near-term perspective, EURUSD so far held the stiff resistance (September high )1.2090. The daily RSI propelling down and the oscillator turned bearish.

Weekly trading range 1.2120-1.1800

A bullish break through September high needed to upgrade the over short term, remote changes at the current stage. The focus shifted back to supports available at 1.1900/1.1880 and 1.1820/1.1800. Alternatively, a weekly close above 1.2130 could open to 1.2300 and 1.2400 (KTM 2018 targets)

View: Buying between 1.1850 and 1.1800 sl below 1.1700 targets 1.2000 and 1.2100 initially.

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

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