Browsing: EUR/USD Forecast

EUR/USD collapsed on the Turkish crisis that threatens to cause some damage also to euro-zone banks. Will it continue falling? The upcoming week features further fallout from this crisis and also all-important GDP figures. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Turkey is suffering from high inflation and no significant policy to tackle it. The American decision to impose sanctions on two Turkish ministers due to the imprisonment of an American pastor exacerbated the fall of the Turkish Lira. The problem turned from local to global when a report in the FT said the European Central Bank is concerned about the stability of three major European banks with exposure to Turkey. EUR/USD was already pressured by unimpressive German data and the trade tensions between the US and China which pushed the greenback higher. The Turkish crisis pushed it to new 2018 lows were cascading stop-loss points turned the fall into an avalanche. In the US, Core CPI came out at 2.4% y/y, better than expected, providing further fuel for the Fed to raise rates.

Updates:

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

  1. German Prelim GDP: Tuesday, 6:00. While we have already received a preliminary estimate of the full euro-zone GDP, we still haven’t heard from the largest country and this happens now.  Europe’s largest economy grew by a relatively disappointing pace of 0.3% q/q in the first quarter of the year after a robust 2017. A slightly higher growth rate of 0.4% is on the cards now.
  2. German Final CPI: Tuesday, 6:00. The initial inflation read Germany showed a monthly price increase of 0.3% in July. The final read is expected to confirm the initial number.
  3. French Final CPI: Tuesday, 6:45. France, the second-largest economy in the continent, saw a drop of 0.1% m/m in inflation. Also here, the final read for July is projected to confirm the initial read.
  4. GDP: Tuesday, 9:00. The second read of growth in the euro-zone is expected to confirm the initial estimate of 0.3% in Q2, which is somewhat slow. If the German number surprises, it could impact expectations as Germany carries a lot of weight.
  5. German ZEW Economic Sentiment: Tuesday, 9:00. This forward-looking survey of 300 analysts and investors disappointed with a significant drop to -24.7 points, deeper into negative territory, reflecting increased pessimism. A small improvement is on the cards to -20.1 points.
  6. Industrial Production: Tuesday, 9:00. The overall industrial output for the continent is published after the major countries have already released their numbers. Nevertheless, the figure tends to surprise. After an increase of 1.3% in May, a slide of 0.3% is on the cards for June.
  7. German WPI: Thursday, 6:00. The Wholesale Price Index provides an early insight at inflation in the pipeline. Prices at the wholesale level eventually reach the retail level. A rise of 0.5% is expected for July, the same as in June.
  8. Current Account: Friday, 8:00. Similar to the narrow trade balance figure, the euro-zone enjoys a broad current account surplus mostly thanks to German exports. A surplus of 23.2 billion euros is expected for June after 22.4 billion in May.
  9. CPI: Friday, 9:00. The final inflation estimate for June is projected to confirm the initial read: 2.1% on the headline and 1.1% on core CPI. The gap between the figures is mostly due to rising energy prices. The increase in core CPI from 1% to 1.1% is an encouraging sign for the ECB.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar kicked off the week in the known ranges, rising to the 1.1624 resistance level mentioned last week. It then collapsed and hit a new 13-month low at 1.1387.

Technical lines from top to bottom:

1.1845 was the high point in early June. 1.1790 capped the pair in mid-July 1.1750 is a low point recorded in mid-May.

1.1720 is a veteran line that worked in both directions, last seen in November. 1.1676 was a temporary low point in late May.

1.1625 provided support to the pair several times in June and July. It is followed by the mid-July trough of 1.1575.

Below, 1.1508 is the previous 2018 low. 1.1450 capped the pair back in June 2017 and may play a role now.

The new low of 1.1387 is a key downside level. Even lower, 1.1300 is a round number and it also held the pair down in June 2017.

1.1115 was a low point also in that period of time. The very round level of 1.10 is next.

I remain bearish on EUR/USD

While the pair may see a temporary correction after the sharp drop and the Turkish crisis may be resolved, monetary policy divergence is still the name of the game. Caution from the ECB meets a hawkish Fed and the trend remains to the downside.

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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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