The euro has started the New Year in positive territory. Currently, EUR/USD is trading at 1.2297, up 0.66% on the day.
In the eurozone, there were no surprises from the manufacturing PMIs for December. The manufacturing sector continues to point to expansion across the bloc. Germany led the way with a reading of 58.3, well above the neutral 50-level. The eurozone followed with 55.2 points. Spain and Italy both accelerated in December, and France confirmed the initial estimate of 51.1 points. The fact that all of the bloc’s major economies are in expansion territory is an encouraging sign, at a time when economic activity has been significantly curtailed by the Covid-19 pandemic.
Germany has traditionally been the locomotive of the eurozone, as the largest economy in the bloc. However, repeated lockdowns due to Covid-19 have hurt domestic activity and weighed on consumer sentiment. Retail Sales, a key gauge of consumer spending, has not been able to put together back-to-back gains since February, prior to Covid-19. In October, Retail Sales rebounded with a gain of 2.6%, but is expected to reverse directions in November, with a street consensus of -2.0 per cent.
This week’s market-mover could well be the runoff election in Georgia, with two US Senate seats up for grabs. If the Republicans can win one of these seats, they will retain control of the Senate, which would mean that the Democrats would be hard-pressed to enact major stimulus programs. If the Democrats manage to win both seats, they would have control over all three branches of government, which would limit the ability of the Republicans to stop Democratic initiatives in Congress, such as raising taxes. The US dollar is projected to fall if the Republicans maintain the Senate and to gain ground if the Democrats win both seats.
EUR/USD Technical
- EUR/USD is testing resistance at 1.2288. The next resistance line is at 1.2441
- There is support at 1.2003, protecting the symbolic 1.20 level. This is followed by a support line at 1.1871
- The pair crossed above the 10-day MA line in the Asian session, which is a sign of an uptrend
