EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
EUR/USD posted slight gains for a second straight week. This week’s key events are German ZEW Economic Sentiment and eurozone inflation. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
German manufacturing numbers were mixed in August. Factory orders declined by 0.6%, marking the third decline in four months. There was better news from industrial production, which rebounded with a gain of 0.3% after two consecutive declines. German Final CPI was stagnant at 0.0%, after a decline of 0.2% in the previous release.
In the U.S., the minutes from the Federal Reserve meeting in September were dovish. FOMC members said that the risks to U.S. growth “were tilted to the downside.” Policymakers noted issues that are nagging the U.S. economy – weak global growth, the toll of the U.S-China trade war and low inflation. The Fed appears ready to cut rates again – according to the CME Group, the likelihood of a 1/4 point rate cut in October stands at 75%. Another sign that the U.S. is experiencing a slowdown came from soft inflation data late in the week. CPI slipped to 0.0%, while the core release slowed to 0.1%. Inflation levels remain subdued, well below the Federal Reserve’s target of 2.0%.
- Industrial Production: Monday, 9:00. The manufacturing sector continues to struggle, with only one gain in the past six releases. The markets are expecting a gain of 0.3% in the August release.
- French Final CPI: Tuesday, 6:45. Inflation in the eurozone’s second-largest economy improved in August, with a solid gain of 0.5%. However, investors are expecting a decline of 0.3% in September.
- German ZEW Economic Sentiment: Tuesday, 9:00. This key confidence indicator remains mired deep in negative territory, pointing to pessimism over the economic outlook. The forecast for October is -27.0. The eurozone indicator is also expected to weaken, with an estimate of -26.7.
- Eurozone Inflation: Wednesday, 9:00. CPI has been pegged at a weak 1.0% for the past two months, and the estimate for September stands at 0.9%. These numbers are well below the ECB inflation target of around 2.0%.
EUR/USD Technical analysis
Technical lines from top to bottom:
We begin with resistance at 1.1390. This is followed by 1.1345.
1.1290 has held in resistance since the first week of July.
1.1215 is the next resistance line.
1.1119 (mentioned last week) is next.
1.1025 has held in resistance since September 23.
1.0950 is providing support.
1.0829 has held in support since April 2017.
1.0690 is the final support level for now.
I remain bearish on EUR/USD
The eurozone continues to struggle and the euro remains below 1.10, as sentiment towards the euro remains weak. Soft global conditions have hampered the manufacturing sector in Germany and the rest of the bloc.
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Further reading:
-
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – the outlook for the Aussie dollar.
- USD/CAD forecast – Canadian dollar predictions
- Forex weekly forecast – Outlook for the major events of the week
Safe trading!
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