Home EUR/USD Forecast Apr. 23-27 – Beginning to tumble
EUR/USD Forecast, Majors

EUR/USD Forecast Apr. 23-27 – Beginning to tumble

EUR/USD  initially stuck to the range but eventually began cracking.  More worrying signs from Europe and further upbeat figures in the US weighed. Will it continue lower?   The ECB decision is left, right, and center. Here is an outlook for  the highlights of this week and an updated technical analysis for EUR/USD.

Euro-zone inflation was downgraded to 1.3% in March and Germany’s ZEW indicator plunged to negative territory. Both negative indicators had only a temporary effect on the common currency. In the US, building permits beat predictions with and Fed officials continued expressing confidence about the economy. Late in the week, US 10-year bond yields began climbing, topping 2.90%. The greenback followed them and advanced across the board.

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

  1. Flash PMI data: Monday morning: 7:00 for France, 7:30 for Germany, and 8:00 for the whole euro-zone. Markit’s forward-looking purchasing managers’ indices have been sliding in recent months, reflecting a slowdown of growth in the euro-zone. In March, France’s manufacturing PMI stood at 53.7 points, modestly above the 50-point threshold that separates expansion from contraction. A drop to 53.4 is on the cards now. The services PMI was 56.9 points and expectations stand at 56.6 for April. Germany, the eurozone’s locomotive, had a manufacturing PMI of 58.2, a strong level but below the highs which were above 50 points and a small slide to 57.6 points is projected. Germany’s services PMI stood at 53.9 points and the same level is predicted now. The euro-zone had 56.6 in manufacturing and 54.9 in services. The manufacturing figure is expected to remain unchanged while services carries expectations for a slide to 54.8 points.
  2. German Ifo Business Climate: Tuesday, 8:00. IFO is Germany’s No. 1 Think-Tank and its survey is wide and highly regarded. After the ZEW indicator fell short and plunged to negative territory, it will be interesting to see if IFO follows the same path. The institution recently changed the formula. A score of 103.2 was seen in March according to the new version and a small rise to 104.7 is projected for April.
  3. Belgian NBB Business Climate: Tuesday, 13:00. This wide-ranging business survey stood at 0.1 points last time, nearly perfectly balanced between growth and contraction. A similar figure is likely nowÑ 0.4 points.
  4. German GfK Consumer Climate: Thursday, 6:00. Contrary to German businesses, German consumers remain upbeat according to the 2000-strong survey. After reaching 10.9 points in March, the score is expected to remain at the same level for another month.
  5. Spanish Unemployment Rate: Thursday, 7:00. Spain still suffers from a high unemployment rate that reached 16.6% in Q4 2017. However, it peaked 27% at some point during the crisis. Another slide is likely in Q1 2018Ñ 16.2% is forecast.
  6. Rate decision: Thursday, the decision is out at 11:45, press conference at 12:30. The ECB removed the potential for increasing the volume of bond buys in their last meeting back in March. This slightly hawkish shift was later downplayed by ECB President Mario Draghi who said it was only a confirmation of the previous data. This shrugging off was later repeated in the ECB’s meeting minutes. Since that decision in March, the economic data has somewhat deteriorated. Hard data such as industrial output and soft data like the forward-looking PMI all slipped and missed expectations. At this April meeting, the ECB does not release new forecasts and is unlikely to change its interest rates. However, the press conference by Draghi will surely move the euro. A focus on a potential slowdown may hurt the euro, especially if he says it has immediate implications on monetary policy. Optimism on current growth rates may boost the euro, preparing us for the next meeting. In June, the ECB may announce what happens after the current program of buying 30 billion euros worth of bonds expires in September. A tapering down until the end of the year and no more buys in 2019 is on the cards now.
  7. French GDP: Friday, 5:30.  France, the second -largest economy in the euro-zone, has enjoyed an uptick in growth, partly attributed to confidence resulting in Macron’s presidency. According to the final data, the economy saw a growth rate of 0.7% q/q, above the average of the euro area. A slower increase of 0.4% is on the cards.
  8. German import prices: Friday, 6:00. Prices of imported goods fell by 0.6% in February, trickling into consumer inflation. A small rise of 0.1% is projected for March.
  9. French CPI (preliminary): Consumer prices rose by no less than 1% in March, partly due to the Easter holiday. A return to modest gains is expected now: 0.1%. The figure feeds into the all-European measure due in the following week.
  10. French Consumer Spending: Friday, 6:45. French consumers were buying intensively in February, as spending jumped by 2.4%. A modest advance of 0.4% is on the cards for March. Note that changes are quite volatile here.
  11. Spanish CPI (preliminary): Friday, 7:00. Spain has already seen inflation reaching 3% y/y but it has dropped since. In March, yearly inflation stood at 1.2%. A repeat of this level is projected in the first
  12. Spanish GDP: Friday,  Spain, the fourth-largest economy, was powering forward in 2017, and the 0.7% growth rate in Q4 was relatively slow to its own self. It already enjoyed quarters of 0.8% and also 0.9% growth rates. The same quarterly growth rate of 0.7% is expected now.
  13. German Unemployment Change: Friday, 7:55. Germany, the largest economy in Europe, has been enjoying a bustling labor market. In February, 19K people dropped off the lists of the unemployed. A slightly smaller slide of 15K is on the cards for March.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar traded in a narrow range around 1.2345 (mentioned last week). It then dropped, eventually closing at 1.2285.

Technical lines from top to bottom:

1.2555 is the three-year high the pair reached in mid-February. 1.2477 was the high point in March but did not hold up for long.

1.2412 was swing high in mid-April and also in March. 1.2345 remains a pivotal line.

Further below, 1.2270 was a swing low in mid-February and mid-March.  The 1.2210 level which served as a cushion in April is the next level to watch.

1.2155 was a low point in early March and the last line before 1.2090, the 2017 high.

I remain bearish on EUR/USD

Dark clouds continue gathering over the euro-zone economies while the US continues printing positive figures and the Fed remains eager to hike.

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Safe trading!

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.