EUR/USD fell to new 2018 lows but managed to bounce after the US Dollar suffered its own disappointing data. What’s next? GDP and inflation figures stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
German factory orders fell by 0.9% and added to the misery while the euro zone’s largest economy’s industrial output rose by 1%, better than expected. The data is not impressive, but at least not all in the red. In the US, inflation fell short of expectations with 2.1% on Core CPI and weighed heavily on the US Dollar. Fed Chair Powell and ECB President Draghi did not provide any news.Updates:
- May 19, 10:51: EUR/USD: FX/CTA Pressing To Downside & Leveraged Flat; Staying Short – BofAML: EUR/USD had another down week, reaching 5-month lows. What’s next? Here is their view, courtesy of eFXdata: Bank of America...
- May 18, 17:20: Italian job makes EUR/USD ignore oversold conditions and dive deeper: The EUR/USD is suffering another down-day, reaching the lowest levels in five months. High US yields support the US Dollar...
- May 17, 18:15: EUR/USD: Market Bias Is To Sell Bounces; Eyes Dec Low At 1.1720 – SocGen: The euro is under pressure but it managed to stabilize around 1.18. What´s next? Maybe it can go lower. Societe...
- May 17, 11:24: EUR/USD has an easier path down amid a strong cap: The EUR/USD reached the $1.1760 target discussed yesterday and bounced. However, an extended recovery will be very hard from here,...
- May 17, 10:37: EUR/USD: yet another dead cat bounce?: The EUR/USD is trading above the $1.1800 level, recovering after reaching yet another 2018 low. Rising US bond yields continue...
- May 16, 11:46: EUR/USD needs a small push to fall below 1.18: The EUR/USD failed to stage a meaningful recovery and fell to a new 2018 low, close to 1.1800. Italy’s new...
- May 16, 9:12: Is 1.1760 the next stop for EUR/USD?: The EUR/USD created a double bottom from where it bounced in a “dead cat” style. Can it recover? Not so...
- May 16, 7:38: EUR/USD: Staying Short; Fundamentals, Rate Differentials & Flows Still USD Positive – BofAML: EUR/USD failed to top 1.20 and fell down quite quickly creating a double bottom. Can it continue to lower ground?...
- May 15, 14:20: US Retail Sales provided the spark to set the dollar rally on fire: US Retail Sales came out as expected, on both the headline and the all-important control group. Good news came from...
- May 14, 14:20: EUR/USD: Italy’s new government is not a market favorite: The EUR/USD extends its gains in the wake of the new week and nears $1.2000. Italy will finally get a...
- May 14, 13:43: 1.2000 is not as close as it seems for EUR/USD: The EUR/USD is extending its recovery after hitting new lows for the year. The pair nears $1.2000 but faces a...
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- German GDP: Tuesday, 6:00. The euro-zone growth dropped to 0.4% q/q in Q1 against 0.6% in Q4 2017 but this did not include the largest country. Nevertheless, the prospects are for a fall from the 0.6% level also experienced in Germany to lower levels of growth as the underlying data disappointed. A growth rate of 0.4% is on the cards for Q1.
- French Final CPI: Tuesday, 6:45. The second-largest economy in the euro-zone saw prices rising by 0.1% m/m in April according to the preliminary release. This number will likely be confirmed in the final read.
- French Private Payrolls: Tuesday, 6:45. France saw a 0.4% rise in total employment in Q4 according to the final read. This preliminary publication for Q1 2018 is expected to show the same scale: 0.4%.
- GDP: Tuesday, 9:00. The Flash GDP version for Q1 2018 is expected to confirm the initial read of 0.4% q/q growth. However, if the German number surprises, expectations will change for this read as well.
- German ZEW Economic Sentiment: Tuesday, 9:00. The ZEW institution publishes an early read on business confidence. Back in April, the score plunged from positive to negative territory, standing at -8.2 and reflecting pessimism. The figure for May is expected to be similar: -8 points. The all-European number carries expectations for 2 points against 1.9 last time.
- Industrial Production: Tuesday, 9:00. The figure for the whole euro-zone is published after the largest countries have published their own data. Nevertheless, surprises are quite common in this read. After a drop of 0.8% in February, a bounce worth 0.6% is predicted for March.
- German Final CPI: Wednesday, 6:00. The initial read for the Consumer Price Index in Germany showed no change in prices month over month. The final read will likely confirm this.
- CPI: Wednesday, 9:00. Euro-zone inflation decelerated in April according to the initial read: 1.2% on the headline and a weak 0.7% on the core CPI. The slowdown is partly attributed to the early Easter holiday. A confirmation of the data is expected now.
- Mario Draghi talks Wednesday, 12:00. The President of the European Central Bank will honor his long-time Vice President Vitor Constancio in an event in Frankfurt. Draghi is scheduled to deliver opening remarks and may refrain from any monetary policy comments.
- German inflation data: Friday, 6:00. Producer prices eventually feed into consumer prices. After a modest rise of 0.1% in March, Germany’s PPI is expected to rise by 0.3%. The Wholesale Price Index was flat in March and is forecast to rise by 0.2% this time.
- Current Account: Friday, 8:00. Similar to the wide trade surplus, the euro-zone enjoys a broad current account surplus due to German exports to a great extent. The surplus stood at 35.1 billion in February and a similar figure is likely in March.
- Trade Balance: Friday, 9:00. The trade balance surplus stood at 21 billion euros in February and we may see a slightly higher number as Germany’s trade balance widened in March.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar started the week with further drops, creating a double-bottom at the 1.1820 level (mentioned last week).
Technical lines from top to bottom:
1.2412 was swing high in mid-April and also in March. 1.2345 remains a pivotal line. Further below, 1.2270 was a swing low in mid-February and mid-March. The 1.2210 level which served as a cushion in April is the next level to watch.
1.2155 was a low point in early March and the last line before 1.2090, the 2017 peak. 1.2060 was the low point in late April and it is the last barrier before the round number of 1.20. Even lower, 1.1915 was a stepping stone on the way up for the pair.
Further down, the 1.1820 level was a stubborn support line in late 2017 and 1.1710 is a veteran line that worked in both directions.
I turn from bearish to neutral on EUR/USD
The pair fell into oversold conditions and may stabilize for another week. The flow of disappointing euro-zone data may come to a halt. US data has not been that great recently. All in all, some consolidation is likely after the big falls. 1.1822 may last as a bottom for a longer period of time.
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