Browsing: EUR/USD Forecast

EUR USD technical analysis ► review of the major events that will move Euro to Dollar during the week.

EUR/USD ended the month of September with further range trading, slightly leaning lower, as central bankers did not rock the boat. Will it make a break in October? PMIs and the ECB’s meeting minutes stand out in the new quarter. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

German business confidence jumped according to IFO, in line with relatively upbeat PMIs. Despite a rise in headline inflation, core inflation refuses to budge, creating a headache for the ECB. Draghi did not say anything of high significance in the closing week of September. In the US, consumer confidence came out at the highest since 2007, but durable goods orders were quite mixed. The final GDP read came out marginally better than expected in the US, but at 1.4%, growth remains very slow.

Updates:

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

eurusd-october-2016-technical-analysis-chart-euro

  1. Manufacturing PMIs: Monday: 7:!5 for Spain, 7:45 for Italy, final figure for France at 7:50, final German number at 7:55 and the final euro-zone PMI at 8:00. In August, Spain had a score of 51 points for the manufacturing sector, reflecting weak growth. A rise to 51.6 is expected. The 50 point line separates growth from contraction. Italy, the third-largest economy, had a score of 49.8, just in contraction territory. A move to 50.2 is predicted. According to the initial release for France for September, the second-largest economy, manufacturing was also in the red with 49.5 points. On the other hand, Germany enjoyed nice growth with 54.3. The euro-zone had 52.6 points. The last three numbers will likely be confirmed now.
  2. Spanish Unemployment Change: Tuesday, 7:00. Spain still has a staggeringly high unemployment rate, despite some improvement. The monthly gauge of joblessness rose by 14.4K in August, slightly better than expected. Seasonal factors are in play here, as Spain’s tourism industry is a significant source of income for the economy. A rise of 23.5K is projected.
  3. PPI: Tuesday, 9:00. The Producer Price Index has been positive in the past three months, rising by 0.1% in July. Producer prices eventually feed into consumer prices. A “no-change” outcome is estimated now.
  4. Services PMIs: 7:!5 for Spain, 7:45 for Italy, final figure for France at 7:50, final German number at 7:55 and the final euro-zone PMI at 8:00. Contrary to the manufacturing sector, Germany under-performs in comparison to its peers. In August, Spain enjoyed strong growth according to Markit, with 56 points. A slide to 54.8 is forecast now. Italy had a score of 52.3 points back then, with 52.1 on the cards now. The preliminary figure for September for France showed a solid 54.1 points score. Germany’s number was closer to the balance between growth and contraction at 50.6 points and the whole euro-zone figure stood at 52.1 points. The last three figures will likely be confirmed now.
  5. Retail Sales: Wednesday, 9:00. Despite being released after the German and French releases, the wider figure can certainly surprise. A strong rise of 1.1% was seen in July, better than expected. After Germany disappointed, a drop of 0.1% is expected in the all-euro-zone figure.
  6. German Factory Orders: Thursday, 6:00. The indicator tends to be volatile, but in the previous release, it advanced by meager 0.2%. Another small advance is on the cards: 0.3%.
  7. Retail PMI: Thursday, 8:10. After two months under 50 points, this purchasing managers’ index by Markit topped to the 50 point threshold and reached 51 in August.
  8. ECB Meeting Minutes: Thursday, 11:30. These are minutes from the September meeting, in which policy was left unchanged. QE changes are on the cards, but no details were provided. Will the relatively dovish tone be seen in this document as well? This is an opportunity for the ECB to push out its intentions, but no action is expected until December.
  9. German Industrial Production: Friday, 6:00. A disappointing drop of 1.5% was recorded in July, countering a rise seen in June. If the see-saw continues, we could see a bounce back in August: 1.1% is projected.
  10. French Industrial Production: Friday, 6:45. The second-largest economy also saw a drop in output, with -0.6% back in July. Also here, a rebound is on the cards: 0.7%.
  11. French Trade Balance:  Friday, 6:45. Contrary to Germany, France has an ongoing trade deficit. A 4.5 billion euro deficit was reported for July. Another negative month is likely now with a narrower deficit of 4.3 billion.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar remained supported at the 1.1125 level (mentioned last week) but did not go too far to the upside. It eventually leaned lower.

Technical lines from top to bottom:

1.1535 is a stepping stone as seen in May 2016 and also beforehand. It is followed by the very round level of 1.15.

1.1460 was a key resistance line in 2015 and 1000 above the multi-year lows. 1.1410 capped the pair in early June. 1.1375 worked as resistance in February and as support in May 2016.

1.1335 worked as the bottom bound of a higher range and then capped recovery attempts in May. 1.1230 capped the pair after the fall in May and worked as resistance.

1.1190 is the post-Brexit high seen in July. 1.1125 cushioned the pair in early September. 1.1070 served as a clear separator of ranges during February and also beforehand.

1.10 is a round number and significant resistance. 1.0905 is the swing low seen in June and serves as a weak support. 1.0825 worked as support in early March 2015 and should also be watched. This is now a triple bottom.

The post-Draghi low 1.0780 replaces 1.08 as support. 1.0710 is the next support line on the chart after temporarily capping the pair in April 2015.

Further below, the 2016 low of 1.0520 and the 2015 low of 1.0460 provide further support.

I am neutral on EUR/USD

While there are many troubles brewing in Europe, the pair has shown extreme stability. This could extend for another week until monetary policy divergence pushes the pair to the downside.

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