EUR/USD Forecast Aug. 10-14 – Euro tests 1.19 but then retreats

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After three consecutive weeks with strong gains, EUR/USD was almost unchanged last week. There are five events in the upcoming week, including retail sales and PMIs. Here is an outlook at the highlights and an updated technical analysis for EUR/USD. 
Eurozone manufacturing PMIs were within expectations in July, with readings above the 50 level, which indicates expansion. German and the eurozone PMIs came in at 51.0 and 51.8, respectively. Spain’s PMI improved to 53.5, up from 49.0. In the services sector, the German and eurozone PMIs dipped slightly. Germany’s index dropped from 56.7 to 55.6, while the eurozone slowed to 54.7, down from 55.1. The French PMI had the best performance, coming in at 57.3. Other German manufacturing orders impressed. Factory Orders jumped by 27.9%, crushing the estimate of 10.3%, while Industrial Production climbed 8.9%, up from 7.8% beforehand.
There was positive news from the US manufacturing sector, as the ISM Manufacturing PMI improved to 54.2 in June, up from 53.6 beforehand. A reading above the 50-level points to expansion. US employment data was stronger than expected. Nonfarm payrolls slowed to 1.76 million, down from 4.8 million beforehand. Still, this beat the forecast of 1.53 million. Wage growth beat the estimate of -0.5% with a gain of 0.2%, after two straight declines. As well the unemployment rate fell from11.1% to 10.2%, beating the estimate of 10.5%.

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

  1. Sentix Investor Confidence: Monday, 8:30. The indicator remains in negative territory, but the numbers have been improving. The July read improved to -18.2, up from 24.8, and the positive trend is expected to continue, with an estimate of -16.0.
  2. German ZEW Economic Sentiment: Tuesday, 9:00. German investor confidence softened, as ZEW Economic Sentiment fell to 59.3, down from 63.4. The downward trend is expected to continue, with an estimate stands at 55.0.
  3. Industrial Production: Wednesday, 9:00. After two sharp declines, industrial production rebounded in May, with a gain of 12.4%. Another double-digit gain is projected for June, with an estimate of 10.1%.
  4. German Final CPI: Thursday, 6:00. German inflation improved to 0.6% in June, up from -0.1% beforehand. The forecast for July stands at -0.5%.
  5. Flash GDP: Friday, 6:00. The eurozone economy declined by 12.1% in the Q2 initial estimate, and analysts are expecting that the second estimate will confirm this reading.
  • All times are GMT

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.2174.

This is followed by 1.2004, just above the psychologically important 1.20 level.

1.1930 is next.

1.1850 was tested in resistance last week.

1.1725 is providing support.

1.1650 is next.

1.1573 (mentioned last week) has some breathing room in support.

1.1470 has held since mid-March. It is the final support line for now.

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I am neutral on EUR/USD

The euro has been pushing towards the lofty 1.20 level, as the US dollar has not looked sharp of late. Still, there are signs of a US recovery, which could raise confidence in the US dollar.

Further reading:

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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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