EUR/USD reached down to new lows. Inflation numbers and a key German survey stand out Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Some ECB members had doubts about action in December, but Draghi stepped up to reiterate his stance for a need to lift inflation. GDP figures were almost OK, with slower growth in Germany and in the euro-zone. In the US, Fed officials leaned towards a hike, but it wasn’t a clear cut.
[do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily graph with support and resistance lines on it. Click to enlarge:
- CPI: Monday, 10:00. The final inflation figures for October are expected to confirm the initial read: 0% in headline CPI and 1% in core inflation, slightly better than seen in previous months.
- Mario Draghi talks: Monday, 10:15 and Friday at 8:00. The president of the ECB speaks again, this time in Madrid and then in Frankfurt. Will he surprise markets with something new after the GDP and inflation figures. Any commentary about the upcoming rate decision in December will rock the euro. His two opportunities to shape market expectations will be closely watched.
- Bundesbank monthly report: Monday, 11:00. The German central bank provides an assessment of the local economy, the euro-zone’s locomotive. Will they express worries about the VW crisis?
- German ZEW Economic Sentiment: Tuesday, 9:00. This early survey for October has shown yet another disappointing drop to 1.9 points, very close to the tipping point between optimism and pessimism. For November, we may see a negative number. However, expectations stand on a bounce to 6.7 points. The all European number carries expectations for a rise from 30.1 to 35.2 points.
- Current Account: Thursday, 9:00. The euro-zone enjoys a wide surplus in its current account mostly thanks to the German export machine. After a +17.7 billion result in August, a similar numbers is on the cards for September: 18.3 billion.
- ECB Meeting Minutes: Thursday, 12:30. In the last rate decision, Draghi dealt a deadly blow to the euro with thick hints about action in December. However, we know that there is a “lively discussion” within the Frankfurt based institution about the necessity of the measures and their size. We will learn more now.
- German PPI: Friday, 7:00. Producer prices have fallen 0.4% in September, and in general the are on the fall. Another slide could be seen now: -0.2%.
- Jens Weidmann talks: Friday, 10:15. At the same event as Draghi talks earlier, his rival at the ECB, the president of the German Bundesbank, will also provide his insights. He is usually hawkish and only talk in favor of more measures will weigh on the euro.
- Consumer Confidence: Friday, 15:00. This official figure from Eurostat showed worse pessimism in October, with -8 points. The 2300 strong survey could show a small improvement for November: -7 points.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar started off the week with a move in range and then fell towards support at 1.0660 (mentioned last week). From there it managed to recover and even challenge higher levels and reach 1.0830, a new line.
Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]
Technical lines from top to bottom:
1.1215, which capped the pair both in June and in August is clear resistance. The post Draghi rise to 1.1130 is also a line to watch.
1.1070 is a double top in October and is the next line. 1.10 is a pivotal line in the range but not so much as support or resistance.
1.09, which was a support line in October, is the next support line. 1.0830 was a post slide high seen in November and also a range separator..
The next line is 1.0790, a minor line in the range. 1.0710 is the next support line on the chart after temporarily capping the pair in April 2015.
1.0615 served as a pivotal line within the lower range, with 1.0550 following.
Below, the 12 year low of 1.0460 is the last line in the sand before parity.
I turn neutral to bearish on EUR/USD
The consolidation may have reached its end: after some doubts from the Fed and the ECB, the unconvincing GDP data and Draghi’s dovish talk weigh on the euro. Even if the US is limping towards a hike and not rushing towards it, weakness in the euro-zone is setting the tone. Draghi could drag down the euro once again.
In our latest podcast we discuss the December decision driving the dollar, declining oil and more:
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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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