EUR/USD Forecast December 16-20 - Euro Punches Past 1.11

EUR/USD Forecast December 16-20 – Euro Punches Past 1.11

EUR/USD posted gains for a second straight month and briefly touched a four-month high. The upcoming week has seven events. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

There were no changes in ECB monetary policy, as Christine Lagarde presided over her first policy meeting as President of the ECB. After a string of declines, German ZEW Economic Sentiment jumped to 10.7, crushing the estimate of 1.1 pts. The eurozone indicator also surged, coming in at 11.2, well above the estimate of 2.2 pts.

Over in the U.S., the Federal Reserve sent a dovish message to the markets, as the dot plots showed that most FOMC members did not anticipate a rate hike before 2021. CPI gained 0.3% and Core CPI rose 0.2%, as both were within expectations. Retail sales dipped to 0.2%, shy of the estimate of 0.5%. Core retail sales slowed to 0.1%, missing the forecast of 0.4%. On Thursday, there were reports that the U.S. and China had reached a limited trade agreement, which could signal the beginning of the end of the nasty trade war which has dampened global growth.

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

PMIs: Monday, 8:15 for France, 8:30 for Germany, eurozone number at 9:00. These are the initial releases for services and manufacturing PMIs. The Services PMIs continue to point to expansion in France, Germany and the eurozone, but the same cannot be said about manufacturing, which has been hit hard by weak global conditions. Manufacturing PMIs are projected to be in contraction territory in the eurozone and Germany. The estimate for France is better, with an estimate of 51.9, which indicates weak expansion.
German PPI: Wednesday, 7:00. This inflation gauge declined by 0.2% in October, shy of the estimate of 0.0%. The estimate for November stands at +0.1%.
German Ifo Business Climate: Wednesday, 9:00. Business confidence improved to 95.0 in November, marking a 4-month high. The upward movement is expected to continue in December, with a forecast of 95.6 pts.
Eurozone CPI: Wednesday, 10:00. Eurozone CPI dipped to 0.7% in October, down from 0.8% a month earlier. CPI is expected to climb to 1.0% in November.
German GfK Consumer Climate: Friday, 7:00. Consumer confidence rose to 9.7 in November, matching the forecast. The indicator is projected to climb to 9.8 in December.
Eurozone Current Account: Friday, 9:00. The current account surplus continues to climb and reached EUR 28.2 billion in September. However, the markets are braced for the surplus to fall to EUR 23.6 billion in October.
Eurozone Consumer Confidence: Friday, 15:00. Consumers remain pessimistic about economic conditions in the eurozone. The indicator came in at -7 in November and no change is expected in the December release.

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 fluid, as EUR/USD is starting the trading week at this level.

1.1025 (mentioned last week) has switched to a support role after gains by EUR/USD last week. 1.0925 is next.

1.0829 has held in support since April 2017.

1.0690 is the final support level for now.

I am bearish on EUR/USD

Economic activity in the eurozone remains soft, and the German locomotive is also showing signs of weakness. The trade agreement between the U.S. and China could raise investor sentiment towards the greenback.

EUR/USD Forecast December 16-20 – Euro Punches Past 1.11

EUR/USD Technical analysis

Kenny Fisher

Kenny Fisher