EUR/USD Forecast Oct. 5-9

EUR/USD  had an interesting trade at the turn of the quarter, eventually jumping higher but unable to hold the gains once again. The ECB’s meeting minutes as well as industrial figures will set the tone. Here is an outlook for  the highlights of this week and an updated technical analysis for EUR/USD.

The euro-zone fell back into deflation but core figures remained stable, allowing Draghi some breathing space. Draghi did see economic growth rising but  refrained from monetary policy hints. Elsewhere, Spain’s success story seems to fade with higher unemployment and disappointing  manufacturing. In the US, data disappointing, with a nightmare NFP report, that sent the pair shooting higher  coming back down towards the middle of the range.

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

1. Finance ministers meet: Monday and Tuesday for the Eurogroup and Tuesday for all EU 28 ministers. This is the first meeting since the new government in Athens has been sworn in. Will the big elephant of debt be discussed? In addition, the employment situation, the refugee crisis, the UK’s membership in the EUR and more topics will like be on the table.
2. Services PMI: Monday: Spain at 7:15, Italy at 7:45, final French number at 7:50, German final number at 7:55 and the final euro-zone figure at 8:00. According to Markit, the Spanish services sector enjoyed very strong growth in August, with 59.6 points, well above the 50 point mark separating growth and contraction.. A score of 59.7 is expected now. Italy lags behind with 54.6 points and is expected to print 54.8 points now. According to the preliminary assessment for France, the  services sector was in expansion in September, albeit a slow one with 51.2 points. Germany  had a stronger  score of 54.3 points. The whole euro-zone  had 54 points. The last three numbers will likely be confirmed in the final read.
3. Sentix Investor Confidence: Monday, 8:30. This wide survey has shown a significant drop in sentiment, with a score of 13.6 points in September. The fresh read for October could show  a lower score: 12.2 points.
4. Retail Sales: Monday, 9:00. While the all-euro-zone figure is released after the German publication, it still carries weight. An advance of 0.4% was seen in July and a small drop of 0.1% is on the cards now.
5. German Factory Orders: Tuesday, 6:00. This volatile indicator of Germany’s all important industry dropped by 1.4% in July and could see a rebound in August: +0.5%.
6. Retail PMI: Tuesday, 9:10. The 1000 strong purchasing managers’  indicator has printed 51.4 points in  August, reflecting mediocre growth.
7. Mario Draghi talks: Tuesday, 17:00. The president of the European Central Bank has a lot of influence on the euro. In his speech in Frankfurt, Draghi may respond to the current outlook for Europe with a look towards China and now the weakening United States. He did not seem to be in a rush in his last important appearance. Did he change his  opinion?
8. German Industrial Production: Wednesday, 6:00. Output in the euro-area’s locomotive has risen by 0.7% in July, bouncing back after dropping in June. The figure for August already reflects the period of the  Chinese crisis and it will be interesting to see if there was any reaction. A rise of 0.3% is on the cards.
9. French Trade Balance: Wednesday, 6:45. Contrary to Germany, the continent’s second largest economy has a trade deficit. After -3.3 billion in July, a similar figure is on the cards for August: -3.6 billion.
10. German Trade Balance: Thursday, 6:00. Germany’s huge trade surplus is one of the things that keeps the euro bid. A surplus of 22.8 billion was seen in August, and a lot of it was to China. Will it fall now? A slide to 20.2 is expected.
11. ECB Meeting Minutes: Thursday, 11:30. The Frankfurt based institution modified its QE parameters in  September and also hinted at more  potential action. However, since then we have heard a message of “no rush” from President Mario Draghi and a few of his colleagues. The minutes could provide us some insights to the readiness to print more euros.
12. French Industrial Production: Friday, 6:45. France has seen a drop of  0.8% in its industrial output in July and could see  a recovery in August. A nice rise of 0.6% is predicted.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar  started off the week by trading below the 1.1215 level (mentioned last week). It then floated in range.

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

Technical lines from top to bottom:

1.1875 was the low seen in 2010 and also capped the pair earlier this year. The August high of 1.1712 is the next line.

1.1680 capped the pair in January on its way down.  The next line is a clear separator of ranges: 1.1535. It was last seen in January as well.

The very round 1.15 level is of importance thanks to its psychological role. It is closely followed by 1.1460 that served as resistance earlier in the year.

The historic line of 1.1373 (from November 2003) still  has a role as resistance. 1.13, the round number,  showed its strength in capping a recovery attempt in early September.

1.1215, which capped the pair both in June and in August is clear resistance. 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. 1.0950 is a pivotal line in the range.

1.0865 provided some support in late May and is weak support before a stronger line: 1.0810, which was the bottom in July also nicely coincides with the low seen in May and is strong 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.

Triangle

As the black lines on the chart show, the pair is stuck in a wedge, which is asymmetrical: the resistance line is  steep and support is moderate. Post NFP, EUR/USD tested the top of the triangle. Will the pair break out?

I am neutral  on EUR/USD

The blow to rate hike expectations from the very poor NFP certainly sent the pair higher. Does this imply a break to the upside? Not so fast. With China and the US slowing down, Europe cannot lead the way. We can expect some  euro dampening comments and also not so positive European figures to balance the situation. The general trend remains down.

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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.