EUR/USD made a move to the upside but eventually failed to stay there and retreated amid the ECB meeting. What’s next? Final inflation figures and a key German survey stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The ECB raised its growth forecasts but the optimism was confined to GDP and not inflation. The euro initially rallied but then retreated, as the door to more bond-buying is still wide open. Forward-looking PMIs support the notion that the euro-zone economies will continue outperforming, but the ECB seems to be waiting to see the white in inflation’s eyes. In the US, the Fed raised rates as expected but two members voted against a hike as inflation remains stuck. This hurt the dollar temporarily as the advances on tax reform and upbeat retail sales data helped the greenback.Updates:
- Dec 22, 15:02: US durable goods orders fall short of expectations – USD still stable: Orders of durable goods rose by 1.3% in November, lower than 2% expected. Looking at core orders, we already have...
- Dec 21, 20:04: Catalan elections: Unionist Ciudadnos are first, but separatist parties win majority: Anti-independence Ciudadanos are expected to get 34-37 seats in the Catalan parliament that has 135 seats. The pro-independence left-leaning ERC...
- Dec 21, 14:34: US GDP Q3 revised down to 3.2% in the final read – USD ignores: 3.3% was expected, so this is a small downgrade. The core PCE was also downgraded from 1.4% to 1.3%. The...
- Dec 20, 17:30: USD slides against majors amid potential tax signature delay: EUR/USD made a clear break above the resistance line of 1.1860, reaching a high of 1.19, just below the next...
- Dec 20, 12:35: EURUSD, Dax and USDJPY Elliot Wave Analysis updates: Good morning traders! We can see a nice leg up on EURUSD, following our bullish path that we highlighted on...
- Dec 19, 10:33: EUR/USD stalls at resistance as the German IFO measure misses: 1.1810 is a tough nut to crack. Yet another attempt to break above this line failed. This time, the trigger...
- Dec 18, 15:44: EUR/USD: Draghi’s drag has its limits – 3 reasons for the recovery: The euro suffered last week from a lack of conviction about inflation. The ECB raised its growth forecasts but did...
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Final CPI: Monday, 10:00. The initial read for euro-zone inflation was OK on the headline: 1.5%. However, core inflation remains stuck at 0.9% y/y in November, causing worries for the ECB. A confirmation of these figures is on the cards now.
- German Ifo Business Climate: Tuesday, 9:00. IFO is Germany’s No. 1 Think-tank and the survey has a lot of influence. The headline business climate score advanced to 117.5 points in November, beating expectations. A small tick up to 117.6 is forecast now.
- German PPI: Wednesday, 7:00. The Producer Price Index in the euro-zone’s largest country rose by 0.3% in October, indicating slightly stronger inflation in the pipeline. A more modest rise of 0.2% is predicted now.
- Current Account: Wednesday, 9:00. Similar to the narrower trade balance figure, the euro-zone’s current account surplus is based on Germany’s surplus. After +37.8 billion in September, the surplus for October carries expectations for a narrower 33.4 billion.
- Belgian NBB Business Climate: Wednesday, 7:00. Despite originating from a small country, Belgium’s NBB measure is a bellwether of the whole continent. A positive score of 1.6 was seen in November, above expectations. Yet another improvement is projected: 2.1 for December.
- Consumer Confidence: Thursday, 15:00. The official 2300-strong survey by Eurostat has been gradually improving and does not show a negative view anymore: it reached a round 0 in November, striking a balance between optimism and pessimism.
- German GfK Consumer Climate: Friday, 7:00. Germany leads the euro-zone via its exports, not consumer spending. However, also consumers are becoming more optimistic with gradual rises in this survey. A score of 10.7 was reported in this survey back in November and a minor increase to 10.8 is on the cards for December.
- French Consumer Spending: Friday, 7:45. Consumers in the second-largest economy decreased their buying by 1.9% in October. The fall is seen as temporary as a jump of 1.5% is on the cards now.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar had a positive start to the week, moving up and hitting resistance at 1.1860 (mentioned last week). The gains did not hold and the pair eventually returned to lower ground.
Technical lines from top to bottom:
The cycle high of 1.2090 looms above. 1.20 is the obvious round level and also worked as resistance in September.
1.1950 was the high level seen in November and a stepping stone towards 1.20. 1.1860 capped the pair in August and in October while working as support in September.
1.1820 worked as a cushion to the pair in late November and works as weak support. 1.1760 served as a cushion in November and also played a role beforehand.
1.1710 was the high of August 2015 and also worked as support in November. 1.1670 was a swing low in October. and hasn’t worked too well.
The 2016 high of 1.1620 slowed down the pair also in October. 1.1555 was the low point in November and works as a cushion. It is followed by the round number of 1.15.
1.1445 is the June 2017 peak and immediate resistance. The next level of support is only 1.1370.
I turn from neutral to bullish on EUR/USD
After the pair wobbled amid all the noise from central banks, the week before the holidays could provide an opportunity for the euro to move up within the range. The Fed may change course in 2018 and the euro-zone’s higher growth expectations support a gradual rise.
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – the outlook for the Aussie dollar.
- USD/CAD forecast – Canadian dollar predictions
- Forex weekly forecast – Outlook for the major events of the week.
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