EUR/USD treads water following German GDP figures

EUR/USD remains practically flat on Tuesday’s early European session, trading around 1.1520 at the time of writing. German GDP data has failed to improve market sentiment, and the market remains focused on comments from Federal Reserve (Fed) officials while awaiting further US macroeconomic figures to assess the outcome of December’s monetary policy meeting.

Data released earlier on Tuesday revealed that Germany’s Gross Domestic Product (GDP) has confirmed the preliminary estimations of a stalled economic growth in the third quarter, following a 0.3% contraction in the second.

On Monday, Fed Governor Christopher Waller seconded last week’s comments from the New York Fed President John Williams and called for a quarter-point interest rate cut next month. Waller affirmed that the available data points to a weakening labour market while inflation is expected to ease.

These comments boosted market expectations that the central bank will ease its monetary policy further in December, although investors know that the decision will be a coin toss amid the wide divergence among policymakers.

Furthermore, US President Donald Trump posted on social media on Monday that relations with China are “extremely strong” after a phone call with Chinese President Xi Jinping. Trump called Japanese Prime Minister Sanae Takaichi shortly afterwards, in an attempt to ease the geopolitical frictions between the two Asian countries.

Some European Central Bank (ECB) speakers will take the stage later in the day, although the main focus will be in the US, with September’s Producer Prices Index (PPI), and Retail Sales figures, and November’s Consumer Confidence data on tap.

The Euro remains depressed amid disappointing Eurozone data

• The common currency remains depressed near 1.1500 as Eurozone data fails to cheer investors. Figures from Germany released on Tuesday confirmed that the region’s leading economy remains gripped, with the GDP showing a 0% growth in Q3, following a 0.3% contraction in Q2. Year-on-year, the German economy ticked up to a 0.3% growth from 0.2% in the second quarter.
• On Monday, the German IFO Business Climate eased to 88.1 in November, from 88.4 in October, against market expectations of a slight improvement to 88.5. The Index measuring the current economic situation improved to 85.6 from 85.3, but the economic expectations deteriorated by a whole point, to 90.6 in November from 91.6 in October.
• The US Dollar, in turn, remains firm despite the dovish comments from Fed officials and higher hopes of a Fed interest rate cut next month. Data from the CME Group’s Fedwatch Tool shows that the odds for a 25 basis points interest rate cut on December 10 have risen beyond 80%, from about 40% last week.
• In the US, later on Tuesday, September’s US PPI is expected to have picked up to 0.3% in the month, from a 0.1% decline in August. The yearly inflation is seen accelerating to 2.7% from 2.6% in the previous month. The Core PPI, however, is seen easing to a 2.7% yearly rate from August’s 2.8%.
• At the same time, US Retail Sales are expected to have grown at a 0.4% in September, down from 0.6% in August. Excluding automobiles, sales of all other products are seen slowing down to 0.4% from the previous month’s 0.7% growth.

Technical Analysis: EUR/USD remains capped below 1.1550 resistance

The EUR/USD pair keeps languishing near two-week lows at the 1.1500 area, with upside attempts capped below 1.1550, although the broader bearish trend is still in play. The 4-hour Relative Strength Index (RSI) failed to consolidate above the 50 level on Monday. The Moving Average Convergence Divergence (MACD) has crossed above the signal line, but remains at levels below zero, underscoring the fragility of the rebound from Friday’s lows.

Resistance at the 1.1550 level has capped bulls in the last three trading days, which leaves the pair in no man’s land above 1.1500. The pair should break that level to confirm a bullish reaction and aim for the November 18 and 19 highs, near 1.1600, and the top of a descending channel from the mid-October highs, which is now around 1.1625.

On the downside, below the 1.1500 psychological level, bears would gain confidence to retest the November 5 lows, near 1.1470, and the bottom of the descending channel from early October highs, now around 1.1425.