- EUR/USD declines on Wednesday following multiple rejections above 1.0400 earlier this week.
- German factory orders fell, and Eurozone sentiment weakened further, adding pressure to the pair.
- President-elect Donald Trump considers declaring an economic state of emergency to implement universal tariffs.
The EUR/USD pair retreats below 1.0300 after failing to sustain gains above 1.0400 earlier in the week. The pair gives up most of its initial weekly progress following disappointing German factory orders data for November, which showed a sharp 5.4% decline compared to a 1.5% drop in October. The weak data comes at a sensitive time, as Germany prepares for snap elections on February 23.
Adding to market uncertainty, President-elect Donald Trump continues to stir geopolitical tensions. Speaking at Mar-a-Lago on Tuesday, Trump reiterated plans to integrate Greenland, the Panama Canal, and Canada into the United States. He also criticized current US interest rates, calling for substantial reductions to spur economic growth, according to Bloomberg.
Daily Digest Market Movers: Economic Emergency
- Trump Tariff Plans: President-elect Donald Trump is reportedly considering invoking a state of economic emergency to implement universal tariffs swiftly, according to CNN.
- German Factory Orders: Factory orders plunged 5.4% month-over-month in November, far below the expected 0%, and contracted 1.7% year-over-year, reversing October’s 5.7% growth.
- German Retail Sales: Retail sales fell 0.6% in November, missing expectations for a 0.5% increase, though better than October’s -1.5%.
- French Consumer Confidence: December’s consumer confidence in France dipped slightly to 89 from November’s 90.
- Eurozone Confidence: Eurozone Consumer Confidence remained steady at -14.5 in December, while Industrial Confidence declined to -14.1, missing expectations of -11.7 and falling below November’s revised -11.4.
Eurozone Producer Prices: The Producer Price Index rose 1.6% in November, surpassing October’s 0.4% increase and beating the 1.5% forecast. - German Bund Yields: German Bund yields climbed to 2.517%, nearing a six-month high and approaching the 2.642% peak from July 2024.
- Equities Performance: European equities show modest gains, outperforming Asian markets, where equities are broadly in the red as Wednesday trading winds down.
Technical Analysis: It could move quickly now
The EUR/USD revival at the beginning of this week looks dead and buried. With a firm correction during the US trading session on Tuesday, it looks like US Dollar (USD) bulls are dominating again. With the resurgence to 1.0440, a window of opportunity was offered for US Dollar bulls that had missed the earlier entry at the end of December.
For the EUR/USD recovery to continue, the first big level to break is 1.0448, the low of October 3, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0549 comes into play. Another catalyst will be needed for this kind of move, as it could squeeze the Dollar bulls.
On the downside, ahead of the current two-year low of 1.0224, the 1.0294 level is now acting as the new first line of defence. It was a pivotal point on Monday, offering room for buyers in EUR/USD to get involved and push price action higher. Further down, the round level at 1.02 would mean a fresh two-year low. Breaking below that level would open up the room to head to parity, with 1.0100 as the last man standing before that magical 1.00 level.
