EUR/USD Forecast April 8-12 – Markets eye ECB rate statement, Fed minutes


EUR/USD was unchanged last week. Central banks will be on center stage this week, with the release of the ECB rate statement and the Federal Reserve minutes. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

The manufacturing sector in Europe continues to struggle. This was underscored in German and eurozone manufacturing PMIs in February, which remained below 50, indicative of contraction. No less worrying, the PMIs continued their downward trend – both the German and eurozone indicators have lost ground for seven successive months.

The ECB released the minutes of its March meeting, and there was little surprise at the pessimistic tone of the minutes. Policymakers noted that economic data continued to be soft, highlighting the manufacturing sector. The minutes expressed concern about continuing global trade concerns, which has had a negative effect on the eurozone economy. As well, inflation is expected to remain low. With the ECB acknowledging that the economic outlook is weak, there is little likelihood of an interest rate hike before 2020.

U.S. numbers failed to impress last week, helping the euro hold its own. Retail sales and durable goods orders posted declines and missed their forecasts. On Friday, employment data was mixed. Nonfarm payrolls came in at 196 thousand, easily beating the estimate of 172 thousand in March. Still, this reading was significantly lower than the December and January releases, both of which were above the 300-thousand level. Wage growth dipped to 0.1%, shy of the estimate of 0.3%.

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

    1. German Trade BalanceMonday, 6:00. Germany continues to post trade surpluses. In January, the surplus fell to EUR 18.5 billion, well short of the estimate of EUR 21.2 billion. The surplus is expected to rise to EUR 19.0 billion in February.
    2. Sentix Investor Confidence: Monday, 8:30. With the eurozone mired in a slowdown, investor confidence remains low. The indicator has recorded four straight declines. Another weak reading is expected in April, with a forecast of -1.7 points.
    3. French Industrial Production: Wednesday, 6:45. Industrial production surprised with a sharp gain of 1.3% in January. This easily beat the forecast of 0.1%.
    4. ECB Rate Decision: Wednesday, 11:45. The ECB is widely expected to leave interest rates at 0.00%, where they have been pegged since 2016. The markets will be keeping a close eye on the rate statement, and a dovish tone from policymakers could weigh on the euro.
    5. German Final CPI: Thursday, 6:00. German inflation remains at low levels. CPI rebounded in February with a gain of 0.4%, shy of the estimate of 0.5%. Another gain of 0.4% is expected in March.
    6. French Final CPI: Thursday, 6:45. French inflation remains anemic, having failed to post a gain since October. A strong rebound is expected in the March release, with an estimate of 0.8%.
    7. Eurozone Industrial Production: Friday, 9:00. The manufacturing indicator posted a strong gain of 1.4% in January, beating the estimate of 1.0%. The markets are braced for a downturn in February, with a forecast of -0.5%.

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. This is followed by 1.1345.

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) remains relevant. 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 bearish on EUR/USD

WIth German and the eurozone mired in a slowdown, investors are worried. The ECB has pushed off any interest rate hikes until 2020 at the earliest, and a dovish rate statement could raise risk apprehension and weigh on the euro.

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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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