EUR/USD continued moving on Greek headlines and was not fully convinced by the deal, closing the week on lower ground. Echoes from the crisis will continue, alongside important PMIs. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
A deal was reached on Greece: but this “aGreekment” is only a preliminary step to prevent a Grexit and to allow negotiations to open for a third bailout and they include extremely harsh terms for the debt stricken country. The initial jump in the euro was very quickly followed by a fall, and the pair was pressured later on as many doubt if the deal is viable. Apart from Greece, German sentiment came out within expectations. In the US, retail sales badly disappointed (again) but the hit for the dollar was temporary as well as data released later on looked better, and Yellen still talked about a hike this year. What’s next?
[do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily graph with support and resistance lines on it. Click to enlarge:
- German PPI: Monday, 6:00. Producer prices eventually feed into consumer prices, and this has an impact on the ECB. After 0% in May, we may see little change in June. 0% is expected.
- Current Account: Monday, 8:00. Similar to the trade balance number, the euro-zone enjoys a big surplus thanks to German exports. After a wide positive figure of 22.3 billion in April, a slightly wider number is on the cards for May: 23.1 billion.
- Spanish Unemployment Rate: Thursday, 7:00. Spain’s unemployment rate stood on 23.8% in Q1 despite strong growth. This is not much better than Greece’s level. A significant drop to 22.6% is on the cards now.
- Consumer Confidence: Thursday, 14:00. The official measure of consumer confidence by Eurostat remained stable in May, at -6 points, reflecting pessimism among the zone’s members. A repeat is probable now.
- Flash PMIs: Friday morning: 7:00 for France, 7:30 for Germany and 8:00 for the whole euro-zone. These are preliminary numbers for July. According to Markit’s final read for French manufacturing in June, growth has finally returned, with a score of 50.7 points, above the 50 point threshold separating growth and contraction. An advance to 51.1 is predicted. The services sector is doing better with 54.1 points and is now expected to slide to 53.9 points. Germany’s manufacturing sector saw 51.9 points and services at 53.8. We now expected 52.1 and 54.1 respectively. The euro zone had more upbeat figures: 52.5 and 54.4 respectively. No change is expected in manufacturing but services are expected to see a small slide to 54.2 points.
- Belgian NBB Business Climate: Friday, 13:00. While coming from a small country, this is a bellwether. The survey of around 6000 participants showed an advance to 3.9 points in June, but the negative number still reflects worsening conditions. A tick down to -4 is on the cards.
* All times are GMT
EUR/USD Technical Analysis
After opening lower, the rush of Euro/dollar to resistance at 1.1190 (mentioned last week) was answered with a quick fall. The pair continued struggling thereafter.
Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]
Technical lines from top to bottom:
We start from a lower level this time. The historic line of 1.1373 (from November 2003) still has a role as resistance. 1.1290, which was a peak in April and support in February is significant resistance.
1.1190, just below the round number of 1.12, proved its strength as a double top in June 2015. It is followed by a low seen in January of 1.1113 which is nearly 0.90 on USD/EUR.
1.1050 returns to the chart after serving as a stepping stone for the pair to rise to higher ground. Also 1.0910 makes a comeback after being the low point in July so far.
1.0865 provided some support in late May and is weak support before a stronger line: 1.0815 which worked in both directions is the low of May and important support.
The next line is 1.0760, which was the low point in both July and August 2003. 1.0715 joins the chart after temporarily capping the pair in April 2015.
1.0660 worked nicely as support in April 2015. 1.0615, which worked in both directions during March 2015 and is better at support.
Another minor line is 1.0550, for a role as support in the same period of time. The very round level of 1.05 served as support during 2003. The lowest level in over 12 years is 1.0462 and this makes it critical support.
I remain bearish on EUR/USD
Many wounds were left open after the Greek deal, and they will be hard to heal. There are also lots of questions left, most importantly about debt restructuring which the IMF supports. In addition, it is clear that the ECB continues hitting the QE pedal to the floor. And while in the US things aren’t looking too great with the fall in retail sales, Yellen’s relatively upbeat comments and some other positive data keep the dollar bid.
In our latest podcast, we drill down the deals, the aGreekment and Iran and the market impact.
Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar forecast
- For the kiwi, see the NZDUSD forecast.
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