Browsing: EUR/USD Forecast

EUR/USD continues to rally and gained over 1.6 percent last week. There are six events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD. 
Key sectors of the eurozone continue to struggle. French Manufacturing PMI came in at 40.6, while the eurozone, German and Spanish indices were both below the 40-level. The Italian PMI came in at 45.4 points. The services sector is in even worse shape. German, French and eurozone PMIs were slightly over the 30-level, and the Italian and Spanish PMIs were in the high-20s. Eurozone retail sales declined by 11.7 percent for a second straight month, after sliding 11.2% a month earlier. The ECB made no change to key interest rates, but added another EUR 676 billion to the Pandemic Emergency Purchase program. The rescue package now stands at EUR 1.35 trillion.
In the U.S., ISM Manufacturing PMI improved to 43.1, up from 41.1 beforehand. The PMI has indicated contraction for three straight months, as the manufacturing sector has been hit hard by the economic crisis. The services sector also finds itself in contraction territory, as the ISM Non-Manufacturing PMI came in at 45.4 in May within expectations. Nonfarm payrolls shocked with a huge gain of 2.5 million in May, defying the estimate of -7.7 million. In April, the economy shed a staggering 20.5 million jobs. The unemployment rate fell to 13.3%, down from 14.7% beforehand. The forecast stood at 19.4 percent.

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

  1. German Industrial Production: Monday, 6:00. Industrial production sank in March, with a decline of 9.2 percent. This figure was worse than the forecast of 7.3 percent. A much sharper drop is expected in April, with an estimate of -16.0 percent.
  2. Eurozone Sentix Investor Confidence: Monday, 8:30. Investor confidence has evaporated in recent months, with a reading of -42.9 in April and -41.8 in May. The pessimism is expected to ease in June, with a forecast of -22 points.
  3. German Trade Balance: Tuesday, 6:00. German exports have ensured that Germany continues to record trade surpluses. In March, the surplus fell to 12.8 billion euros, short of expectations and its lowest level since 2011. The downtrend is expected to continue in April, with an estimate of 11.9 billion euros.
  4. Eurozone Revised GDP: Tuesday, 9:00. GDP declined by 3.8 percent in Q1, as the eurozone has buckled under the economic meltdown due to Covid-19. The third read is expected to confirm this reading.
  5. French Final CPI: Friday, 6:45. Inflation in the eurozone’s second-largest economy remains low. CPI has posted only one gain in the past four months and came in at a flat 0.0% in May. This figure is expected to be confirmed by the upcoming second reading.
  6. Eurozone Industrial Production: Friday, 9:00. The manufacturing sector has been hit hard by the economic downturn, and industrial production plunged 11.3% in March. Analysts are braced for a huge drop of 20.0% in April.

EUR/USD Technical analysis

Technical lines from top to bottom:

With EUR/USD posting strong gains last week, we start at higher levels:

1.1620 has held in resistance since early October 2019.

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.

1.1215 has switched to a support role, after holding in resistance since mid-January. 1.1119 is next.

1.1025 (mentioned last week) has some breathing room after sharp gains by EUR/USD last week.

1.0920 is the final support level for now.


I remain neutral on EUR/USD

The eurozone remains in poor economic shape, but the euro has managed to take advantage of the U.S. dollar, which has shown broad losses in recent weeks. We can expect further volatility from EUR/USD in the coming weeks, as both the U.S. and Europe continue to grapple with economic uncertainty.

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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