EUR/USD Forecast April 1-5 – Euro at 3-week low, German manufacturing reports eyed


EUR/USD lost ground during last week, dropping close to the 1.12 level. The key events this week are German manufacturing and services PMIs, as well as U.S. nonfarm payrolls and wage growth. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

German data was a mix last week, as the eurozone’s largest economy is showing signs of a slowdown. Business confidence beat the estimate, but consumer confidence missed expectations. Inflation dropped to 0.5%, while retail sales beat expectations with a gain of 0.9%.

Nobody is hitting the panic button just yet, but the U.S. economy has lost some of its luster. Final GDP disappointed with a gain of 2.2%, compared to the initial reading of 2.6%. Personal spending posted a weak gain of 0.1%, and CB consumer confidence fell to 124.1, down sharply from 131.4 in the previous release.

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

    1. Manufacturing PMIs: Monday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German one at 7:55, and final euro-zone number at 8:00. The Markit manufacturing indices have shown a significant slowdown. This is a result of the global trade war, which has led to less demand for eurozone exports. Germany has posted two straight scores below 50, pointing to contraction. France and Spain’s PMIs are also showing contraction. The eurozone indicator also has slowed for seven straight months and dropped to 49.3 in February.
    2. Inflation: Tuesday, 9:00. Headline CPI came in at 1.5% in February, and an identical gain is expected in March. Core CPI is projected to tick lower to 0.9% in March, down from 1.0% a month earlier. With inflation levels well below the ECB target of 2.0%, there is little pressure on the bank to raise interest rates in the near future.
    3. Spanish Unemployment Change: Tuesday, 7:00. Unemployment rolls are expected to post their first drop of the year in the March release, with an estimate of -33.3 thousand.
    4. PPI: Tuesday, 9:00. After two successive declines, PPI posted a gain of 0.4%, matching the estimate. The estimate for February stands at 0.2%.
    5. Services PMI’s: Wednesday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German one at 7:55, and final euro-zone number at 8:00. Services sector numbers have generally been better than those in the manufacturing one. Spain had a strong score of 55 in February, while Italy had 50.2 points. The initial read for France for February stood at 48.7, indicating contraction. For Germany it was 54.9 and for the euro-zone 52.7. No changes are expected in the final versions.
    6. German Factory Orders: Thursday, 6:00. The indicator has posted three successive declines, as the manufacturing sector has been hurt by the global trading war. Better news is expected in February, with an estimate of 0.3%.
    7. ECB Monetary Policy Meeting Accounts: Thursday, 11:30. The minutes provide a detailed record of the March policy meeting. The bank recently stated that it had no plans to raise rates prior to 2020, and the euro responded with losses. Investors will be focusing on the expectations of members regarding economic growth for the eurozone.
    8. German Industrial Production: Friday, 6:00. The indicator has posted four straight declines, as manufacturing continues to struggle. A strong rebound of 0.6% is projected for the March release.

EUR/USD Technical Analysis

Technical lines from top to bottom:

1.1620 has held in resistance since the start of October.

1.1570 is next.

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. 1.1345 remained relevant during the week.

1.1290 was breached in support late in the week, as EUR/USD dropped sharply.

1.1270 was a double-bottom in December 2018.

1.1215 (mentioned last week) was tested in support late in the week. It is a weak line. This is followed by 1.1119.

1.1025 was a cap back in May 2017.

1.0950 is next.

1.0840 was a low point in May 2017.

I am neutral on EUR/USD

Weak German manufacturing numbers have hurt the euro, and more data is on the way this week. PMIs are expected to remain in contraction territory, which could sour investors on the euro. At the same time, other manufacturing reports are expected to show improvement. The U.S. will release key job numbers late in the week, which will likely have a strong impact on the direction of EUR/USD.

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About Author

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.

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