Euro Drifts Sideways as Traders Prepare for Friday’s Inflation Report

The EUR/USD is trading slightly better despite potentially bearish economic news from Germany.

Early in the session, the EUR/USD traded up to 1.2714. The market declined after traders reacted to the Ifo Institute’s business climate index, which dropped from 103.2 in October from 104.7 in September, its lowest level since December 2012. Traders were looking for a reading of 104.5.

We could be looking at a sideways trade this week as traders prepare for Friday’s Euro Zone economic data.

Position-squaring ahead of the Fed meeting on Wednesday and technically oversold conditions helped underpin the GBP/USD on Monday. Also giving the Sterling a lift was follow-through buying after last week’s better-than-expected U.K. retail sales report.

The weaker U.S. Dollar helped underpin December Comex Gold futures, but not enough to produce positive gains. The direction of the dollar will continue to control the movement in gold. This week, the biggest influence on gold and the dollar will be the Fed statement on Wednesday, followed closely by the Euro Zone inflation data on Friday.

Technically, the chart pattern suggests gold is headed for a test of $1219.40 to $1211.00 over the near-term.

December Crude Oil futures are trading weaker. The negative news continues to pile up with several major investment firms suggesting prices $15 to $20 lower in 2015. Contrary traders may read this as a sign that a short-term bottom is near.

Overproduction and lower demand have been hurting crude oil prices, but don’t expect the U.S., Russia, or Saudi Arabia to cut back on production anytime soon. The growing threat of a global economic slowdown should continue to weigh on demand.

Watch for tight trading ranges and light volume over the next few days due to position squaring ahead of the U.S. Federal Reserve Monetary Policy Statement on Wednesday and Friday’s release of Euro Zone consumer inflation data.