EUR/USD retreats despite positive Factory Orders in Germany

Trade Balance data in the United States has indicated shows the deficit widening, a headwind for the US Dollar. Germany’s Factory Orders helped the Euro to hold buoyant amid low expectations, while December’s monetary policy meetings by the Fed and the ECB will help to keep the EUR/USD pair within familiar ranges.
The Euro is extending some of Monday’s losses against the US dollar, stuck below the 1.0505 figure on Tuesday’s risk aversion, as US data was short in boosting the dollar. Germany’s Factory Orders surprisingly exceeded previous estimates, underpinning the Euro. Therefore, the EUR/USD is trading at 1.0487 after hitting a daily low of 1.0475.

Wall Street is expected to open on back foot echoing the negative mood. The US Department of Commerce revealed the October Trade Balance, which showed the deficit widening for two-consecutive months, as figures came at $-78.2B exceeding estimates of $-80B, though trailed by September’s $-74.1B. Delving into the data, the Exports rose by $256.6B below September’s data, while Imports jumped $334.8B above the previous month’s $332.6B.

In the Eurozone, Germany revealed its October Factory Orders, which rose above estimates of 0.1% and smashed September’s figures. Worth noting that orders grew for the first time since July. Compared to October 2021, orders fell at an adjusted 3.2%. The report added that companies still have difficulties fulfilling their orders as supply chains are interrupted, blamed on the war in Ukraine and distortions spurred by the Covid-19 crisis.

The EUR/USD pair has not been able to rally back toward multi-month highs at 1.0594 due to last week’s solid US Nonfarm Payrolls (NFP) data for November, with companies hiring more than 263K jobs, exceeding 200K estimates. Also, Average Hourly Earnings jumped to 5.1% YoY, and Monday’s release of the positive ISM Non-Manufacturing PMI at 56.5 vs. 53.3 estimated will help the dollar.

Investors are assessing that the Fed would keep tightening monetary conditions. Money market futures odds for a 50 bps increase in the Federal Funds rate (FFR) at the December meeting are at 79.4%, while odds for a 75 bps are at 20.6%. Regarding the European Central Bank (ECB), some policymakers, including Villeroy, Makhlouf, and Herodotou, expressed their support for a 50 bps rate hike, contrary to Knots and Holtzman, which backed an aggressive 75 bps.

Technically; the EUR/USD daily chart suggests the pair remains upward biased but losing some momentum, as Monday’s candlestick printed an inverted hammer, which usually appears at the end of an uptrend/downtrend.