Browsing: EUR/USD Forecast

EUR/USD showed little movement in the first week of the year. There are eight events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
German and eurozone manufacturing PMIs beat their estimates, with readings of 43.7 and 46.3, respectively. Still, this points to sharp contraction, as the German and eurozone manufacturing sectors have been dampened by global trade tensions. German CPI bounced back with a gain of 0.5% in December, after a decline of 0.8% a month earlier.
In the U.S., the holiday schedule resulted in the release of the FOMC minutes on Friday. Policymakers said they expected rates to remain steady “for a time”, but did note continuing downside risks to the U.S. economy due to global trade tensions. ISM Manufacturing PMI slipped to 47.2 in December, down from 48.1 a month earlier. This was shy of the estimate of 49.0 and the weakest reading since June 2009.

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

  1. German Retail Sales: Monday: 7:00. Retail sales fell 1.9% in October, much worse than the estimate of -0.2%. A strong rebound is expected in November, with a forecast of +1.1%.
  2. Services PMIs: Monday: 8:15 for Spain, 8:45 for Italy, final French figure at 8:50, final German one at 8:55, and final euro-zone number at 9:00. Services PMIs continue to outshine the manufacturing PMIs, with readings slightly above the 50-level, pointing to weak expansion. The PMI readings are expected to confirm the initial readings from November.
  3. Sentix Investor Confidence: Monday, 9:30. After a string of declines, the indicator came in at 0.7 in December. The January forecast stands at 3.0, which would indicate an improvement in investor confidence.
  4. CPI Flash Estimate: Tuesday, 10:00. Inflation came in at 1.0% in November. The markets are expecting better news in December, with a forecast of 1.3%.
  5. Retail Sales: Tuesday: 10:00. Eurozone retail sales fell by 0.6% in October, its weakest reading in 2019. The indicator is expected to rebound in November, with an estimate of 0.6%.
  6. German Factory Orders: Wednesday, 7:00. Factory orders fell by 0.4% in October, the third decline in four months. The markets are expecting better news in November, with an estimate of 0.2%.
  7. German Industrial Production: Thursday, 7:00. The German manufacturing sector continues to struggle, as industrial production fell 1.7% in October. The indicator is expected to rebound in November, with an estimate of 0.9%.
  8. ECB Monetary Policy Meeting Accounts: Thursday, 12:30. The minutes will provide details of the monetary policy meeting held in December, the first to be chaired by ECB President Christine Lagarde.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.1515, which was a high point at the end of January.

1.1435 was a low point at the beginning of February.

1.1390 has held firm in resistance since June. This is followed by 1.1345.

1.1290 was last tested in early July. 1.1215 is next.

1.1119 is providing support. It could face pressure early in the week.

1.1025 (mentioned last week) is protecting the symbolic 1.10 level. 1.0925 is next.

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

I am neutral on EUR/USD

The U.S. dollar has been under pressure, and the euro took advantage, posting gains of 1.9% in December. Risk appetite has been strong recently, which has pushed the dollar lower. However, the airstrike which killed a top Iranian general on Friday could shake up the markets and cause investors to snap up the safe-haven greenback.

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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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