EUR/USD rebounded nicely last week, gaining 1.4%. Traders should be prepared for another busy week, with the release of German and eurozone inflation numbers, as well as German business and consumer confidence data. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
The euro managed to post strong gains, decided lukewarm data. German ZEW Economic Sentiment decreased sharply, falling to -21.1 in June, its lowest level since November. Eurozone CPI slowed to 1.2% in May, down from 1.7%. German and European PMIs showed little change, pointing to contraction in the manufacturing sector, while the services industry continues to expand.
In the U.S., a lack of key indicators meant that investor focus was on the Federal Reserve. As expected, the Fed maintained rate levels, but the message from policymakers was decidedly dovish, reinforcing speculation that a rate cut is on the way. But when? The Fed hinted at a rate cut in 2020, but it’s noteworthy that eight FOMC members favor a rate cut in 2019. The markets are prepared for a move later this year, with the CME Group pricing in a rate cut in September at 62%.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- German Ifo Business Climate: Monday, 8:00. Business confidence has slowed in the past two months, as the business sector is showing concern about economic conditions in the eurozone’s largest economy. The indicator dropped to 97.9 in May, and the downturn is expected to continue in June, with an estimate of 97.4 points.
- German GfK Consumer Climate: Wednesday, 6:00. Consumer confidence has been dropping, as the slowdown in the eurozone has soured the mood of German consumers. The indicator slowed to 10.1 in May, down from 10.4 points a month earlier. The forecast for June stands at 10.0 points.
- Spanish Flash CPI: Thursday, 7:00. The fourth-largest economy saw inflation drop to 0.8% in May, down from 1.5% a month earlier. No change is expected in the June release.
- German Preliminary CPI: Thursday, All Day. This event should be treated as a market-mover. Inflation in May came in at a weak 0.2%, and no change is expected in the initial estimate for June.
- Inflation Data: Thursday, 9:00. Eurozone CPI came in at 1.2% in May, and no change is expected in the initial reading for June. The core reading is expected to rise to 1.0% in June, up from 0.8% in May.
EUR/USD Technical analysis
Technical lines from top to bottom:
We start with resistance at 1.1751.
1.1620 has held in resistance since early 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. The pair broke through resistance at 1.1345 late in the week.
1.1290 is next. Close by, 1.1270 was a double-bottom in December 2018.
1.1215 has breathing room in support following strong gains by EUR/USD last week.
1.1025 was a cap back in May 2017.
1.0950 is the final support level for now.
I am bearish on EUR/USD
With tensions rising in the Persian Gulf and the eurozone struggling with a slowdown and the uncertainty over Brexit, the euro could face some headwinds. The U.S. economy remains solid, although the increasing likelihood of a rate cut later this year could limit the upside for the greenback.
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