EUR/USD Forecast July 9-13 – Focus on the ECB’s messages

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EUR/USD stabilized on a calmer mood and the final end of the German political crisis. What’s next? The ECB Meeting Minutes stand out in the second week of July. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Germany’s political crisis suffered another round of worries on Monday but a compromise paved the way for some stability in Europe’s largest economy. Data was OK in Europe and upbeat in the US. There was some calm on the trade front and this helped the euro recover.

Update: A better market mood helped the euro advance but 1.1800 is a tough nut to crack. ECB President Draghi repeated the well-known messages: the economy is growing, inflation will eventually reach the target, but the ECB will not raise rates before the end of the summer of 2019. Reports about a split ECB sent the pair up after it fell on a risk-off atmosphere that hurt the common currency. The US plans imposing tariffs on no less than $200 billion worth of Chinese goods.

Updates:

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

  1. Mario Draghi speaks Monday, 1:00 and 3:00, Wednesday, 7:00. The President of the European Central Bank will first testify before different committees in the European Parliament and then at an ECB confidence in Frankfurt. Draghi was very dovish in his recent post-rate-decision press conference, stressing the conditionality of the exit from the QE program. However, later on, reports said some see a rate hike in late 2019 as “too late”. Draghi will have the chance to shape market expectations about raising rates and also comment about the economy, inflation, and trade tensions.
  2. German Trade Balance: Monday, 6:00. Germany has a broad trade surplus and it enjoys the relative weakness of the euro. Trump’s tariffs endanger this surplus which stood in April at 19.4 billion. A level of 20.3 billion is on the cards now.
  3. Sentix Investor Confidence: Monday, 8:30. This wide survey of investors and analysts extended its falls and reached 9.3 points in June, far below the 30+ levels seen several months ago. A small drop to 9 is projected now.
  4. French Industrial Production: Tuesday, 6:45. The second-largest economy in the euro-zone saw a drop of 0.9% in its industrial output, worse than had been expected back in April. The figure for May may be positive. A bounce worth 0.7% is expected.
  5. German ZEW Economic Sentiment: Tuesday, 9:00. The early business survey from ZEW was a big disappointment in June, -12.6 points, the first time in the negative ground for a long time. A recovery back to positive territory is unlikely. A further deterioration to 17.9 is forecast.
  6. German Final CPI: Thursday, 6:00. The initial publication for June stood at a monthly rise of 0.1% in consumer prices. The final version will likely confirm it. The data feeds into the final euro-zone CPI measure.
  7. French Final CPI: Thursday, 6:45. The second-largest economy saw the same figure as the largest one: 0.1% m/m. And also here, no changes are projected in the final read.
  8. Industrial Production: Thursday, 9:00. Industrial output for the whole area is published after the main countries have already published their data. Nevertheless, surprises are quite common here. Production dropped by 0.9% in April and a bounce could be seen in May: +1.2% is on the cards.
  9. ECB Meeting Minutes: Thursday, 11:30. The European Central Bank made big announcements in its June decision and the policy accounts will reveal more data about the deliberations behind the scenes. The ECB laid out its plan to reduce bond-buying to €15 billion in Q4 2018 and end QE altogether from 2019. However, they also pledged to leave interest rates at current levels through the summer of 2019 and President Mario Draghi stressed the conditionality attached to any changes in the policy. It will be interesting to see how wide was Draghi’s backing and the strength of the hawkish camp led by Bundesbank President Jens Weidmann. The document may also contain hints about further action. Trade concerns may also be of interest after reports stating that the ECB is worried about the implications of trade disputes on the economy.
  10. German WPI: Friday, 6:00. The Wholesale Price Index serves as another measure of inflation. Wholesales prices eventually reach the consumer. The WPI surprised with an increase of 0.8% in May. We will now get the figures for June.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar started the week by moving towards the 1.1676 level mentioned last week.

Technical lines from top to bottom:

1.2060 was the low point in late April and it is the last barrier before the round number of 1.20.

The round number of 1.19 is also notable as a pivotal line in the range and it also temporarily held the pair back in late 2017. 1.1845 was the high point in early June.

Further down, the 1.1820 level was a stubborn support line in late 2017. 1.1750 is a low point recorded in mid-May.

1.1720 is a veteran line that worked in both directions, last seen in November. 1.1676 was a temporary low point in late May.

Lower, 1.1630 was a pivotal line in November and 1.1550 was the trough around that time.

Below, 1.1510 is the new 2018 low and also a ten-month trough. Further down, 1.1480 served as support back in July 2017.

I remain bearish on EUR/USD

Even though Germany’s crisis is over, the looming trade wars pose a significant threat to the economic recovery in the euro-zone. The US economy is doing better than the euro-zone one and this is not fully priced in.

Our latest podcast is titled Festive Fed, Dovish Draghi, and a global trade war

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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