EUR/USD Has Three Fundamental Reasons To Rise

EUR/USD trades around 1.1350, sticking to familiar ranges and not going anywhere fast. There are three fundamental reasons to favor the upside for the pair.

Here they are, in ascending order.

1) Trade optimism

Optimism on trade talks between the US and China keeps the pair supported.

China has offered to buy more US goods in order to balance the broad trade surplus it has with the US. US President Donald Trump will meet Chinese PM Liu He late in the day, and the announcement of the encounter sparked hopes. There have been no reports on progress on structural changes such as intellectual property.

2) Euro-zone looking better

The euro also has its own reasons to rise, or at least stabilize. Euro-zone purchasing managers’ indices for February, published on Thursday, came out mostly above expectations. Is the euro-zone bottoming out? Perhaps not so fast, as the all-important German manufacturing sector still seems to struggle. German Q4 GDP was confirmed at 0%. Nevertheless, things may be as bad as previously seen.

The German IFO Business Climate is projected to remain stable in the fresh report for February. European Central Bank President Mario Draghi will be speaking later in Bulgaria and may shed some more light on recent developments. Several of his colleagues spoke out on Thursday and expressed concerns about the slowdown.

3) US weakness

Things are not that rosy in the US either. The belated Durable Goods Orders report for December came out better than expected on the headline but missed on the all-important non-defense ex-air measure with -0.7%, lowering growth forecasts. Existing Home Sales also fell short of projections with 4.94 million annualized, exposing the weakness of the housing sector once again.

No less than four Fed officials will be speaking late in the day. The most notable ones to watch are Vice Chair Richard Clarida and New York Fed President John Williams, No. 2 and No. 3 respectively. The No. 1, Chair Jerome Powell, will testify on Tuesday.

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Disclaimer: Foreign exchange (Forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher. Investment objectives, risk appetite and ...

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