Browsing: EUR/USD Forecast

After losing ground for three successive weeks, EUR/USD reversed directions and posted strong gains of 0.8% last week. There are five events this week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
German services PMI slowed to 54.5 in July, down from 55.8 a month earlier. The eurozone indicator also lost ground, falling from 53.6 to 53.2. Germany’s industrial numbers were mixed. Factory orders jumped 2.5% in June, rebounding from a decline of 2.2% in May. However, industrial production posted a decline of 1.5% in June, its second decline in three months. Finally, Germany’s trade surplus slipped to EUR 18.1 billion in June, down from EUR 18.7 billion a month earlier.

U.S. equity markets had their worst one-day fall in 2019 on Monday, after China devalued its currency to a 10-year low against the dollar. The move prompted the U.S. to label China as a “currency manipulator”. China also retaliated against the U.S. pledge to hit Chinese products with a new 10% tariff, as Beijing said it would no longer purchase any U.S. agricultural products. The yen continued to attract safe-haven flows, and has jumped 2.8% since the end of July.

In the U.S., the ISM Non-Manufacturing PMI slowed to 53.7 in July, its lowest level in almost three years. This is indicative of weaker expansion in the services sector. The week wrapped up with inflation data, which remains at low levels. The producer price index was unchanged at 0.2%, matching the forecast. The core release declined by 0.2%, its first decline of the year.

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

  1. German Final CPI: Tuesday, 6:00. Investors are interested in inflation levels in Germany, the eurozone’s largest economy. The initial reading for German CPI came in at 0.5%, and the second reading is expected to confirm this forecast.
  2. German ZEW Economic Sentiment: Tuesday, 9:00. This key confidence indicator has dropped sharply and slipped to -24.5 in July, slightly below the forecast of -22.1. Another decline is expected in August, with an estimate of -27.8. The eurozone indicator came in at -20.3 in July and the estimate for August is -21.7.
  3. German Preliminary GDP: Wednesday, 6:00. The Germany economy grew by 0.4% in the first quarter, matching the estimate. It looks to be a different story in Q2, with an initial estimate of 0.1%.
  4.  French Final CPI: Wednesday, 6:45. Inflation remains weak in the eurozone’s second-largest economy and posted a gain of 0.2% in June. The markets are braced for a decline of 0.2% in July.
  5. Eurozone Flash GDP: Wednesday, 9:00. The eurozone economy grew by 0.2% in Q1, according to the initial estimate in July. The second estimate is expected to confirm this gain.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.1621. This line has held since the first week in October.

1.1515 was a high point at the end of January. 1.1435 was a low point at the beginning of February.

1.1390 was a stepping stone on the way up in late January and capped EUR/USD earlier.

1.1345 is next. 1.1290 has held in resistance since the first week of July.

Close by, 1.1270 was a double-bottom in December 2018.

1.1215 (mentioned last week) is the next resistance line.

1.1119 switched to support early in the week as EUR/USD posted strong gains.

1.1025 was a cap back in May 2017.

1.0950 is next.

1.0829 has held in support since April 2017. It is the final support level for now.

I remain bearish on EUR/USD

The eurozone economy remains weak, and key indicators are predicting a soft second quarter for Germany, the largest economy in the eurozone. With global trade tensions escalating, there could be some headwinds ahead for the euro.

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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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