EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
EUR/USD fell 1.3% last week, its sharpest weekly loss since August. There are five events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
Eurozone and German manufacturing PMIs showed improvement in January, with readings of 47.9 and 45.3, respectively. The PMIs remain below the 50-level, which separates contraction from expansion. The services sector continues to outperform manufacturing, as German Services PMI came in at 54.2 and the all-eurozone PMI dipped to 52.5 points. Other German manufacturing data was soft – Factory Orders fell by 2.1%, while Industrial Production declined by 3.5%.
In the U.S. there was good news from the manufacturing sector, as ISM Manufacturing PMI rose to 50.9 in January, up from 47.2 a month earlier. This figure beat the forecast of 48.5 points. This marked the first showing expansion since July. The week wrapped up with employment data, which was mixed. Wage growth came in at 0.2%, shy of the estimate of 0.3%. Nonfarm payrolls sparkled with a gain of 225 thousand. This was much stronger than the forecast of 163 thousand.
- Sentix Investor Confidence: Monday: 9:30. The indicator jumped to 6.1 in January, up from 0.7 a month earlier. This beat expectations and was the strongest reading since November 2018. Another strong reading is expected in February, with an estimate of 6.1 points.
- Industrial Production: Wednesday, 10:00. This manufacturing indicator improved to 0.2% in November, up from -0.5%. However, this missed the forecast of 0.3%. Analysts are braced for a decline of 1.8% in December.
- German Final CPI: Thursday: 7:00. The first-estimate for German CPI in the fourth quarter declined by 0.6% and the final release is expected to confirm this figure.
- German GDP: Friday, 7:00. German GDP came in at 0.1% in Q3 and is expected to show an identical gain in the fourth quarter.
- Flash GDP: Friday, 10:00. The first estimate for fourth-quarter GDP came in at 0.1%, indicative of weak growth in the eurozone. The second estimate is expected to confirm the initial estimate.
EUR/USD Technical analysis
EUR/USD posted considerable gains at the end of the week, coming close to the 1.11 level.
Technical lines from top to bottom:
1.1390 has held firm in resistance since June.
1.1290 was last tested in early July. 1.1215 is next.
1.1119 has some breathing room in resistance.
1.1025 (mentioned last week) has switched to resistance after sharp losses by EUR/USD last week.
1.0925 is an immediate support level.
1.0829 has held in support since April 2017. 1.0690 is next.
The round number of 1.0600 is the final support level for now.
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I remain bearish on EUR/USD
The eurozone economy has been churning out lukewarm data, and is much weaker than the U.S. economy. The euro has broken below the key 1.10 line and the negative momentum could send EUR/USD to lower ground.
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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