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EUR/USD Forecast, Majors

EUR/USD Forecast June 23-27

EUR/USD  managed to hold its ground and even rise a bit thanks to the greenback’s weakness. Has it found a bottom? Purchasing managers’ indices, initial German inflation numbers for June and another important German survey are the important events.  Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.

In the euro-zone, fears of deflation still remain: even if May’s numbers were not downgraded, the recent German PPI and the strong value of the euro leave worries in place. Also the German ZEW indicator disappointed by falling once again. The pair’s strength came from weakness on the other side of the Atlantic: the Fed left the dovish tone unchanged and did not hint of earlier than expected rate hikes. Will the ECB accept the current levels or try to talk the euro down? Let’s start:

[do action=”autoupdate” tag=”EURUSDUpdate”/]

EUR/USD daily chart  with support and resistance lines on it. Click to enlarge:

 EURUSD June 23 27 2014 technical foreign exchange currency chart fundamental trading

  1. Manufacturing and services PMIs: Monday. The pickup in private sector growth eased in France during May, declining below the 50 point line, after just two months in growth territory. French services sector posted a 49.2 reading after expanding 50.4 in April. Meanwhile Private sector expansion continued in Germany and the Eurozone. German service sector edged up to 56.4 from 54.7 in April, beating expectations for a 54.8 reading. The Euro block jumped to a near three-year high of 53.5 from April’s 53.1, contrary to expectations of a dip to 53.0. However, despite the relative growth in the services sector, manufacturing output worsened in May The Eurozone declined to 52.5 from 53.4, a bit more than the 53.2 estimated by analysts, French manufacturing deteriorated to 49.3 from 51.2 and German manufacturing declined to 52.5 from 53.4 in April. Overall, the readings indicate, the Euro bloc’s recovery remains fragile. French services sector are expected to reach 49.5 while manufacturing is predicted to remain at 49.6. German services sector is expected to decline further to 55.8 while the manufacturing is expected to reach 52.7. The Eurozone services are expected to rise to 53.4, while maintaining 52.2 in the manufacturing sector.
  2. German Ifo Business Climate: Tuesday, 8:00. German business confidence worsened more than expected in May, reaching 110.4 from 111.2 posted in April, suggesting Europe’s locomotive is slowing down. Analysts expected a moderate decline to 111 in May. The current conditions indicator declined to 114.8 from 115.3, while the outlook fell to 106.2 from 107.3. Another fall to 110.3 is expected now.
  3. Belgian NBB Business Climate: Tuesday, 13:00. The National Bank of Belgium’s business barometer declined May reaching -6.8 from -4.6 in April. Confidence fell among manufacturing and building industries as well as, in the retail trade sector, while, the economic outlook edged up in business-related services posting 10.8 from 8.6 in April. Economic outlook worsened as well as in April. Sentiment is expected to improve further to -4.1.
  4. GfK German Consumer Climate: Wednesday, 6:00. German buyers’ mood remained positive in June as in the previous months, reaching 8.5 points. Economic expectations rose sharply and willingness to buy inched higher, while income expectations declined compared to the previous month. Events in Ukraine, highly impacting previous readings had only marginal bearings this time. A small rise to 8.6 is expected this time.
  5. German CPI: Friday, states release data during the day and the all-German number is released at 12:00. Germany’s inflation slowed more than expected in May consumer prices declined 0.1%, missing forecast for a 0.1% rise. This early forecast was verified two weeks later in the Final inflation reading. A rise of 0.2% is expected now.
  6. French Consumer Spending: Friday, 6:45. French consumer spending fell sharply by 0.3% in April after increasing 0.6% in March, suggesting a weak start in the second quarter. Compared to a year earlier, spending declined 0.5%. President Francois Hollande efforts to revive France’s economy by cutting taxes on businesses and minimum wage earners are not quite rewarded yet. An increase of 0.3% is expected this time.
  7. Spanish Flash CPI: Friday, 7:00. Spain’s inflation moderated slightly in May rising 0.2% from 0.4% in April , largely due to declines in the prices of food and beverages.  Spanish policymakers were concerned of a deflation trend, after the harmonized CPI fell 0.2% in March ongoing high unemployment and weak domestic demand for goods is putting consumer prices under pressure. Other countries in the euro zone fear from the same trend. A 0.3% gain is forecasted now.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar  started the week with range trading between 1.35 and 1.3585 (mentioned  last week), before a move to the higher range of 1.3585 to 1.3650. It  eventually closed above this line.

Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]

Technical lines from top to bottom:

The April peak of 1.3905 serves as minor resistance. It is followed by  1.3865  which capped the pair during the same time as well.

1.3830, which was a long serving 2013 peak comes back into the focus after capping the pair in March 2014 and serving as a clear separator several times. 1.3785 worked as support for the pair during April and served as resistance beforehand.

1.3740, which provided some support at the end of 2013 is now key support to the downside. The round number of 1.37, is another support line after capping the pair in December yet it is weakening.

1.3677 was the peak in June so far, and could turn into important resistance. 1.3650 worked as strong resistance during May and June but is weakening now.

1.3585 served as the bottom of the range and still carries weight despite the breakdown in June. 1.3550 worked as support in January  but is now weakening  The round number of 1.35 worked as the last cushion in June and is strong also due to the roundness.

1.3450 worked as resistance in August 2013 and as support in September and October. It is now a key line on the downside. The round number of 1.34 was last seen in December as a stepping stone for the pair on its way down.

Broken uptrend support

The uptrend support line that accompanies the pair since late February has been broken after a battle. This serves as another downside hint.

I  remain bearish on  EUR/USD

The  dovish FOMC meeting  weakens the dollar, but the euro was certainly not the big winner, and for good reasons. Low inflation still remains a big concern, and the still-high value of the euro does not contribute to lifting it. German inflation numbers could weigh  leave the pair depressed, and so could PMIs.

All in all, there is  now more room to the downside for the pair. More:

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.