Looking for the latest outlook, for the current week? Check out the section: EUR/USD Forecast.
The Euro starts the new week in a weak position, after edging below a support line on Friday. The upcoming week features two major business sentiment surveys as well as important inflation figures. Here’s an outlook for the major events that await the Euro, and an updated technical analysis for EUR/USD.
EUR/USD chart with support and resistance lines marked on it. Click to enlarge:
Debt problems in Greece, credit downgrade in Spain and a surrender to excellent American figures all hurt the Euro. Will it get back up on its feet? Let’s review the 11 events that await the Euro. The technical analysis will follow:
- Industrial Production: The all-European industrial production is published after the Germany and France publish their figures. But since we’ve witnessed the big differences between the member states, and previous surprises, this figure’s release is important. After two months of growth, last month’s 0.3% rise is expected to be followed by a dip of 0.6%. Published on Monday at 10:00 GMT.
- Employment Change: Also here, the whole continent’s quarterly figure is published rather late, but still is significant. European jobs are expected to decline for the fifth quarter in a row, after a drop of 0.5% in Q2. Published on Monday at 10:00 GMT.
- French CPI:Also in the continent’s second largest economy, prices are hardly moving. The rise of 0.1% last month is expected to be followed by a rise of 0.2% in prices this time – not something that will push for a rate hike. Published on Tuesday at 7:45 GMT.
- German ZEW Economic Sentiment: This is already a major indicator for the Euro. The highly regarded survey of investors is known to be very indicative. After improving for many months, this figure dropped in recent months from the peak of 57.7 to 51.11 points. While this is still positive, the decline hurt the Euro. Another drop is predicted this time, down to 50.2 points. Together with the German sentiment, the institute also published the figure for all of Europe, but this is less significant. Also here, sentiment fell from the peak of 59.6 down to 51.8 and is continued to drop to 50.9. Published on Tuesday at 10:00 GMT.
- French Flash PMI: On Wednesday morning, purchasing managers’ indexes will be released gradually in the continent, with PMI separated to the manufacturing and services sectors. France starts at 8:00 GMT. French Flash Manufacturing PMI is above the critical 50 point mark in the past 5 months, but has slightly dropped last month to 54.2 points. It’s expected to regain some of its loss, and rise to 54.8. French Flash Services PMI has been positive, above 50 for four months, and showed strong gains. This time it’s predicted to relax from the peak of 60.4 and drop to 60.1 points.
- German Flash PMI: Half an hour later, on Wednesday at 8:30 GMT, the continent’s largest economy releases its figures. German Flash Manufacturing PMI has a hard time to remain above the 50 mark, and dipped below it (meaning contraction) three months ago. The recent rise to 52 is expected to be followed by a further gain to 52.6 points. Also the German Flash Services PMI isn’t all the time on the rise, but it didn’t dip below 50. The result of 51.4 is expected to be followed by a rise to 52 points.
- European Flash PMI: PMI for the whole continent is published at 9:00 GMT. Flash Manufacturing PMI is expected to post a third month above of expansion expectations, and rise from 51.2 to 51.5 points. Flash Services PMI is predicted to edge up from 53 to 53.3 points, closing a fourth month of expansion.
- CPI: Consumer prices in Europe have declined for 5 straight months. Deflation is a real burden on the Euro. This time, there’s hope for higher prices, as this was seen in the preliminary release and the German numbers. So, CPI is expected to rise by 0.6% (annualized) this time, matching the Flash release. Also Core CPI is expected to show a rise – of 1.2% (annualized) exactly as in the past two months. Published on Wednesday at 10:00 GMT.
- German PPI: Moving to producer prices, also here a rise in prices is expected. PPI hasn’t been stable in Germany, with prices going up and down occasionally. Last month’s unchanged number is expected to be followed by a 0.2% rise this time. Published on Friday at 7:00 GMT.
- German Ifo Business Climate: The second major survey from Germany is published on Friday at 9:00 GMT. This wide survey of 7000 businesses also has a strong impact on the Euro. It has risen in the past 8 months, and reached 93.9 points last month. It’s expected to edge up to 94.6 this time.
- Current Account: European current account has surprised with a surplus 3 months ago, but turned negative once again afterwards. The flow of goods, cash and services has shown a deficit of 5.4 billion last month. It’s predicted to squeeze down to 2.3 billion this time. Published on Friday at 9:00 GMT.
EUR/USD Technical Analysis
The Euro began last week by breaking below the 1.48 line that served as the bottom line for the range during November. It never got back above it. After range trading between 1.4690 to 1.4790 (a lower range), it fell as low as 1.4586 before closing at 1.4613, a little below the 1.4626 support line.
So now, 1.4626 is the initial point of resistance, rather than support last week. Further the aforementioned 1.48 is another point of resistance, which was a support line, but was already tested last week as a resistance line.
Far above, the upper border of the previous range is now another resistance line – 1.5060, and even higher, the year-to-date high of 1.5144 is next.
Looking down, I’ve marked two lines as a range – EUR/USD struggled to break 1.4444, a major resistance line. After the break in September, it didn’t go below 1.4480 – so the 1.4444 to 1.4480 range supports the pair now.
Even further below, 1.42 worked as support / resistance in the past, but the focus is on the serious barrier of 1.4444-1.4480.
My sentiment is now bearish on EUR/USD.
The break broke two resistance lines. Europe isn’t only Germany and France, and the far flanks of the continent are weighing on the currency. Now that the US recovery is seen in more and more indicators, Europe’s growth doesn’t have an advantage anymore.
There are always interesting reads about this pair on the web:
- Casey Stubbs talked about the upcoming breakout and the bearish sentiment.
- Mohammed Isah sees further downside after the uptrend was broken.
- The Geek Knows brings an interesting technical review.
I’ll add more link later on. Suggestions are welcome!
Further reading:
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For GBP/USD, look into the British Pound forecast.
- For the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
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