EUR/USD Forecast June 3-7 – Investors await PMIs, ECB rate decision

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EUR/USD posted slight losses last week. It’s a busy week, including PMIs, consumer inflation and the ECB rate decision. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

Voters in 28 EU countries went to the polls in an election for the European parliament. The results were dramatic, as far-right parties across Europe made gains at the expense of center-left and center-right parties. In France, Marine Le Pen’s National Rally party came in first, handing a stinging defeat to President Macron. In Germany, Chancellor Angela Merkel’s conservatives lost ground, and voters in the U.K sent a strong message to Labor and the Conservatives, as Nigel Farage’s Brexit party won the most seats.

The German locomotive has been showing signs of weakness, but the labor market has traditionally been a bright spot. However, unemployment rolls ballooned by 60 thousand in April, compared to the estimate of -8 thousand. The indicator has recorded consecutive declines for almost two years, and investors are hoping that the April spike was a one-time blip. However, if German employment numbers continue to miss expectations, the euro could lose ground.

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

https://www.tradingview.com/x/YjWLfeaP/

  1. Manufacturing PMIsMonday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German one at 7:55, and final euro-zone number at 8:00. Spanish manufacturing improved to 51.8 points in April, but is expected to slow to 51.4 points. Italian manufacturing PMI improved to 49.1, indicative of contraction. The May estimate is 48.5. The French release improved to 50.0, and is projected to improve to 50.6. The German and eurozone releases remained mired in contraction territory, with scores of 44.4 and 44.9 points. Little change is expected in the May readings.
  2. Spanish Unemployment Change: Tuesday, 7:00. Unemployment rolls fell sharply in April, with a reading of -91.5 thousand. The estimate for May stands at -67.0 thousand.
  3. Inflation: Monday, 7:55. CPI flash estimate improved to 1.7% in April, above the estimate of 1.6%. The forecast for May stands at 1.4%. The core release climbed to 1.2% in April, but is projected to drop to 1.0% in May.
  4. Services PMIsMonday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German one at 7:55, and final euro-zone number at 8:00. Spanish PMI dropped to 53.1, and is expected to slow to 52.5 in May. The Italian release dipped to 50.4. and is expected to contract in May, with a reading of 49.9. The French is projected to improve to 51.7, up from 50.5. The German and eurozone releases also expected to weaken in May, with scores of 55.0 and 52.5 points.
  5. Eurozone Retail Sales: Wednesday, 9:00. This consumer spending indicator dropped to 0.0% in March and the downturn is expected to continue in April, with an estimate of -0.5%.
  6. German Factory Orders: Thursday, 6:00. The indicator posted a gain of 0.6% in March, after four successive declines. The April estimate stands at 0.1%.
  7. Rate Decision: Thursday, 11:45. The ECB is expected to maintain interest rates at a flat 0.00%. Investors will be keeping a close eye on the tone of the rate statement. A dovish statement could send the euro lower.
  8. German Industrial Production: Friday, 6:00. The indicator posted a gain of 0.5% in March, crushing the estimate of -0.5%. The April estimate stands at -0.4%.
  9. French Industrial Production: Friday, 6:45. Industrial production declined 0.9% in March, marking a 4-month low. The markets are expecting a rebound in April, with an estimate of 0.3%.

* All times are GMT

EUR/USD Technical analysis

Technical lines from top to bottom:

1.1570 has held in resistance since mid-October.

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. This is followed by 1.1345.

1.1290 is the next resistance line. Close by, 1.1270 was a double-bottom in December 2018.

1.1215 has held in resistance since mid-May.

1.1119 (mentioned last week) was tested in support late in the week.

1.1025 was a cap back in May 2017.

1.0950 is the next support level.

1.0870 was a swing high in December 2017.

1.0820 is the final support line for now.

I am neutral on EUR/USD

The pair has been relatively quiet, and this lack of movement could continue. The direction of the pair could depend on the services and manufacturing PMIs – weaker than expected scores could weigh on the euro.

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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.