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EUR/USD Declines, Unfazed by US Reports

January 7, 2021 by

The euro has been declining against the US dollar through the day today, moved mostly by the eurozone members’ poor PMI reports than by the US macroeconomic data. The latter was rather mixed today.

Initial jobless claims were at 787k for during the week ending January 2, down slightly from the preceding week’s revised level of 790k. The reading was a little below the median forecast’s value of 798k. (Event A on the chart.)

Trade balance deficit widened from $63.1 billion in October to $68.1 billion in November, faring worse than the median forecast of $66.7 billion deficit. (Event A on the chart.)

ISM services PMI, surprisingly, improved from 55.9% to 57.2% in December. Traders had expected this indicator to go down to 54.5%. (Event C on the chart.)

EUR/USD as of 2021-01-07

Yesterday, several important reports were released (none of them shown on the chart):

ADP employment came out at -123k vs. 60k new jobs expected by the market participants in December. Last month, the number of new jobs created (as reported by the ADP Research Institute) had been 304k.

Markit services PMI decreased to 54.8 in December from 58.4 in November according to the final estimate. Market participants had been expecting the preliminary report’s value of 55.3 to go down only slightly — to 55.2.

Factory orders rose by 1.0% in November, exceeding the average forecast of a 0.7% increase. The previous month’s gain had gotten a positive revision from 1.0% to 1.3%.

Crude oil inventories fell by 8.0 million barrels during the week ending January 1, significantly faster than the median forecast had suggested (a drop by 2.8 million barrels); the inventories went down by 6.1 million barrels a week earlier. Total motor gasoline inventories increased by 4.5 million barrels and are now at the average value for this time of year.

FOMC minutes of its December meeting confirmed the general consensus among market participants that the Fed will warn about QE tapering long before it starts. Also as expected, the minutes confirmed the central bank’s unanimous support of its current stimulus programs.

On Tuesday, a report on ISM manufacturing PMI showed an unexpected increased from 57.5% to 60.7% in December, whereas the forecast had been for a decline to 56.6%. (Not shown on the chart.)

If you have any comments on the recent EUR/USD action, please reply using the form below.

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