Browsing: EUR/USD Forecast

EUR/USD was down sharply on Friday and posted a losing week. There are seven events on the calendar this week, including PMIs and eurozone inflation. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

German Ifo Business Climate improved to 92.4, up from 90.1. This marked a 5-month high. However, German GfK Consumer Climate came in at -12.9, marking an 11th successive decline. France, the second-largest economy in the eurozone, showed a 1.4% contraction in GDP in Q4 of 2020. Eurozone headline CPI gained 0.9% and the core reading climbed 1.4% in January. This confirmed the original estimate.

In the US, Fed Chair Powell had a dovish message for the markets in his testimony before Congress.  Second-estimate GDP for Q4 came in at 4.1%, revised upwards from 4.1%. There was positive news from Durable Goods reports, with strong acceleration in January. The headline read jumped 3.4% while Core Durable Goods rose 1.4%.

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

  1. German Prelim CPI: Monday, All Day. Germany’s CPI jumped 0.8% in January, its highest level since April 2019. However, inflation is expected to slow to 0.4% in February, with a forecast of 0.4%.
  2. Manufacturing PMIs: Monday, 8:15 in France, 8:30 in Germany, and 9:00 for the whole eurozone. The German and eurozone manufacturing sectors remain well into expansionary territory. The second-estimate PMIs for Germany and the eurozone are expected to confirm the initial readings, with readings of 60.0 and 57.7, respectively. France, Spain and Italy are all projected to post readings above the 50-level, which separates contraction from expansion.
  3. German Retail Sales: Tuesday, 7:00. In December, Retail Sales showed a sharp contraction, with a read of -9.2%. A modest gain is expected in January, with an estimate of 0.9%.
  4. Inflation Report: Tuesday, 10:00. Inflation pressures have been accumulating in the eurozone. Headline CPI is expected to remain unchanged at 0.9%, while the core reading is projected to show a gain of 1.1%.
  5. Services PMIs: Wednesday, 8:15. Services remain in contraction, with readings below the 50-level. The second-estimate PMIs for Germany and the eurozone are expected to confirm the initial readings, at 45.9 and 44.7, respectively. Services in Italy, Spain and France also are showing contraction, with readings below the neutral 50-level.
  6. Retail Sales: Thursday, 10:00. Retail Sales rebounded in December with a reading of 2.0%, which was a 4-month low. The markets are expecting a downturn in January, with a gain of -1.5%.
  7. German Factory Orders: Friday, 7:00. Factory Orders declined by 1.9% in December, the first decline since April. The indicator is forecast to rebound in January, with an estimate of 0.8%.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.2331 (mentioned last week).

1.2251 has held in resistance since the first week in January.

1.2170 is an important monthly resistance line.

1.2037 is the first support level. It is a weak line.

1.1957 has held in support since the first week in February.

1.1850 is the final support line for now.

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I remain neutral on EUR/USD

The US dollar showed strong gains last week, but this could be the tail end of a dollar short squeeze. At the same time, the US economy continues to show stronger numbers than in the eurozone.

Further reading:

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EUR/USD Forecast, Technical Analysis, Outlook ► preview of the major events that move Euro/Dollar during the week. Here are some general data. Scroll down for the latest EUR/USD forecast.

EUR/USD characteristics

Euro/dollar is the world’s most popular currency pair for both retail and institutional traders. 19 European countries that vary quite a bit from each other share the single currency. The key countries are Germany, France, Italy and Spain. The US dollar is the reserve currency of the world.

A wide trade surplus, originating mostly from German exports, means that funds are flowing into the euro area. When markets are calm, this influx pushes the common currency higher. However, the eurozone has its share of economic and political issues and speculation takes its toll.

The euro debt crisis engulfed Greece, Portugal, Ireland, Italy, and Spain. While the worst may be behind us, it is always looming. The leadership of the European Central Bank and President Mario Draghi helped stabilize and even save the euro. His “whatever it takes” speech in July 2012″ was a turning point. The diverse countries are linked by a monetary union but not a fiscal one, and this remains the Achilles heel.

EUR//USD trading is often choppy, especially when it is confined to narrow ranges. When the pair is in trend, past technical lines, even those from 2003, are respected quite nicely. €/$ has a “good memory”.

EUR/USD recent moves

The euro-zone economies are growing at a robust pace in 2017. Unemployment is falling and even core inflation is finally rising albeit temporarily All this has led to optimism that sent the euro higher.

The ECB will halve bond-buys to 30 billion euros from January 2018. However, it left the door open to extending the QE program beyond September, and this hurt the euro. A weaker euro makes exports more attractive and pushes imported inflation higher. Draghi is happy with growth but worried about inflation.

The political uncertainty in Germany is becoming an issue after inconclusive elections in September. A fresh round of elections joins the crisis in Catalonia and the political instability in Italy.

In America, hopes for fiscal stimulus faded early in the year, but are now on the rise again, with Trump’s tax plan. The Federal Reserve has maintained its plan for three rates hikes in 2017 despite lower US inflation.

Latest weekly EUR/USD forecast

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