Browsing: EUR/USD Forecast

EUR/USD tumbled down as the US Dollar stormed higher and as Draghi did not provide any ammunition to the bulls. Will it continue? A busy week featuring inflation and GDP data awaits. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

The ECB left its policy unchanged and acknowledged the slowdown. President Mario Draghi saw it as a temporary moderation but remained cautious and provided no news about announcing the end of QE. This was not enough to battle the US Dollar, that surged alongside a rise in US bond yields. The 10-year yields topped 3% for the first time since 2011 amid upbeat data and a growing sense that the Fed is set to raise rates at a faster pace.

Updates:

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

  1. German Retail Sales: Monday, 6:00. One of the more worrying signs in the slwodown came from German retail sales that badly disappointed with a fall of 0.7% in February. The data for March is expected to show a bounce worth 0.8%.
  2. Monetary data: Monday, 8:00. The amount of money in circulation, M3 Money Supply, decelerated from the highs around 5% to 4.2% in February. Another moderation is projected now: 4.1%. On the other hand, Private Loans held onto the upbeat pace, at 2.9% y/y and are expected to remain at the same rate also in March.
  3. German CPI: Monday, during the European morning with the all-German data due at 12:00. Germany Consumer Price Index feeds into the euro-zone CPI later in the week and carries that largest weight. After a m/m rise of 0.4%, a slide of 0.1% is on the cards now.
  4. Manufacturing PMI data: Wednesday morning: 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German data at 7:55, and the final euro-zone number at 8:00. Back in March, Spain’s manufacturing sector saw moderate growth according to Markit’s forward-looking indicator with a score of 54.8 points. A further moderation to 54.3 is expected in April. Italy, the third-largest economy in the euro-zone, saw 55.1 points and a slowdown to 54.6 is on the cards for April. The preliminary score for April for France was 53.4, for Germany it was 58.1, and for the euro-zone, it stood at 56 points. These three figures are expected to be confirmed in the final version, but small changes are not uncommon.
  5. Euro-zone GDP: Wednesday, 9:00. Euro-zone growth has slowed down or “moderated” according to ECB President Mario Draghi. After some of the bigger countries have reported mixed figures, the euro-zone as a whole is forecast to show a quarterly growth rate of 0.4% q/q in the first quarter of 2018 after a more robust 0.6% in Q4. A further slowdown may slow the ECB’s exit from the QE program.
  6. Unemployment Rate: Wednesday, 9:00. The euro-zone unemployment came down a long way from above 12% in 2013 to the current level of 8.5% in February. The same rate is expected for March.
  7. Jens Weidmann talks: Wednesday at 15:40 in Manheim and Friday at 13:00 in Frankfurt. The President of the German Bundesbank is seen as the leading candidate to replace Mario Draghi at the helm of the ECB in late 2019. In both appearances, Weidmann may shed some more light on the slowdown/moderation and may also respond to the latest GDP figures. In his speech on Friday, he will also have the inflation data out.
  8. Spanish Unemployment Change: Thursday, 7:00. Spain still suffers a high level of unemployment despite the significant improvement. The early read of the number of the unemployed provides an insight into the progress on reducing the jobless rate. After a drop of 47.7K in March, a wider fall of 100.2K is on the cards for April. It is important to note that employment in Spain is heavily influenced by seasonal factors due to a large tourism industry.
  9. Euro-zone inflation: Thursday, 9:00. The ECB has a “single needle in the compass” – headline inflation. As of March, it stands at 1.3% y/y and is expected to remain unchanged in the preliminary read for April. However, core inflation is projected to drop from 1% to 0.9%. This may weigh on the euro and slow down the ECB’s exit from bond-buying.
  10. PPI: Thursday, 9:00. Somewhat overshadowed by the CPI data, the Producer Price Index still matters. A repeat of the modest 0.1% rise is on the cards for March, following the same rise in February.
  11. French Trade Balance: Friday, 6:45. Contrary to Germany, France has a chronic trade deficit. After a deficit of 5.2 billion euros in February, a modest narrowing to 5.1 billion is on the cards for March.
  12. Services PMI data: Friday morning: 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German data at 7:55, and the final euro-zone number at 8:00. Markit’s Spanish Services PMI stood at 56.2 points in March, reflecting good growth. It is expected to edge down to 56.1 points in April. The Italian figure is projected to rise from 52.6 to 53. The initial read for France for the month of April stood at 57.4, for Germany at 54.1 and the euro-zone at 55 points. The final read is expected to confirm these data.

* All times are GMT

EUR/USD Technical Analysis

After a struggle around the 1.2155 level (discussed last week) the pair tumbled down quickly and left dust behind it.

Technical lines from top to bottom:

1.2555 is the three-year high the pair reached in mid-February. 1.2477 was the high point in March but did not hold up for long.

1.2412 was swing high in mid-April and also in March. 1.2345 remains a pivotal line.

Further below, 1.2270 was a swing low in mid-February and mid-March. The 1.2210 level which served as a cushion in April is the next level to watch.

1.2155 was a low point in early March and the last line before 1.2090, the 2017 peak.

1.2060 was the low point in late April and it is the last barrier before the round number of 1.20. Even lower, 1.1915 was a stepping stone on the way up for the pair.

I remain bearish on EUR/USD

The pair finally succumbed to the slowdown in Europe and the upbeat data in the US. While another big downfall is unlikely, the confirmation of the moderation via the GDP report and another weak CPI figure will likely keep the pressure as the Fed prepares to raise rates.

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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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