Browsing: EUR/USD Forecast

EUR/USD posted losses for a second straight month and briefly fell below the key 1.20 level. There are four events on the calendar. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

German consumer spending slumped as Retail Sales plunged 9.6% in December, much lower than the estimate of -2.0%. Eurozone retail sales bounced back with a gain of 2.0% after a reading of -6.1% beforehand. Final PMI reports for Germany and the eurozone indicated strong growth in manufacturing but pointed to contraction in the services sector.

Eurozone inflation was unexpectedly strong in January. Headline inflation rose to 0.9% while core CPI improved to 1.4%. German Factory Orders fell by 1.9%, its first decline in eight months.

In the US, ISM Manufacturing PMI dipped to 58.7, down from 60.7 beforehand. Still, this figure points to strong expansion, as manufacturing remains a bright spot in the US economy. The services sector grew for an eighth straight month in a row, as the ISM Services PMI improved to 58.7, up from 57.2 beforehand. This was the highest reading since February 2019.
U.S. Nonfarm Payrolls disappointed with a negligible gain of 49 thousand, which didn’t even reach the forecast of 85 thousand. Wage growth rose 0.2%, down from 0.8% beforehand. There was better news from the unemployment rate, which dropped from 6.7% to 6.3%, its lowest level since March.

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

  1. German Industrial Production: Monday, 7:00. Industrial Production in the eurozone’s largest economy fell to 0.9% in November. The downtrend is expected to continue, with a forecast of 0.1% for December.
  2. Sentix Investor Confidence: Monday, 9:30. Investor Confidence came in at 1.3 in January, ending a nasty streak of 10 successive declines. Another gain is expected for February, with a forecast of 4.1.
  3. German Final CPI: Wednesday, 7:00. Inflation has struggled but improved in December with a solid gain of 0.5%. The upward trend is expected to continue, with a street consensus of 0.8%.
  4. French Industrial Production: Wednesday, 7:45. Industrial Production sagged In November, with a reading of -0.8%. Analysts are expecting a strong rebound in December, with an estimate of 0.4%.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.2317.

1.2250 has held in resistance since April 2018.

1.2126 is next.

1.2002 (mentioned last week) is protecting the symbolic 1.20 line.

1.1846 is an important monthly support line.

1.1667 is the final support level for now.

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I remain neutral on EUR/USD

The eurozone economy remains weak, and the Covid lockdowns are making economic conditions even worse. The Biden stimulus program is gathering steam, which could weigh on the US dollar.

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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