EUR/USD Forecast May 24-28 – German GDP could weigh on euro

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EUR/USD posted gains last week and briefly touched its highest level since January. There are four releases in the upcoming week, including eurozone inflation. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

Eurozone GDP contracted by 1.8% in Q1, after an identical drop in the fourth quarter. This points to an economy that is technically in recession. Eurozone Final CPI came in at 1.6% in April, confirming the initial read. Manufacturing continues to show strong growth, with PMI readings of 64.0 in Germany and 62.8 in the eurozone. Business activity is showing more moderate growth, as Services PMIs for Germany came in at 52.8 and the eurozone at 55.1 points.

In the US, the Philly Fed Manufacturing Index slowed to 31.5, down sharply from 50.2 and shy of the forecast of 40.8. Unemployment claims fell for a third straight week, coming in at 444 thousand versus 478 thousand a week earlier. The Manufacturing PMI was up slightly to 61.5, above the forecast of 60.0. The Services PMI sparkled with a read of 70.1, as the business sector showed unprecedented growth. This beat the estimate of 64.3. The 50-level separates expansion from contraction.

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

  1. German Final GDP: Tuesday, 9:00. The German economy contracted by 3.3% in Q4, on an annualized basis. We now await the data for the first quarter.
  2. German Ifo Business Climate: Tuesday, 11:00. Business confidence in April accelerated for a third straight month, rising to 96.8. The upswing is expected to continue in May, with a forecast of 98.1.
  3. German GfK Consumer Climate: Thursday, 9:00. Consumers remain pessimistic about economic conditions, as the index remains mired in negative territory. The estimate for the May release stands at -5.3 points.
  4. French Inflation Report: Friday, 9:45. Inflation has been generally weak in the eurozone’s number two economy. The estimate for CPI for May is 0.3%.

 

Technical lines from top to bottom:

1.2412 (mentioned last week) is an important monthly resistance line.

1.2328 is next.

1.2199 is an immediate resistance level.

1.2070 is the first support level.

1.1997 has held in support since mid-April.

1.1849 is the final line for now.

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I am neutral on EUR/USD

The US economic picture is much brighter than that of Europe, and inflation concerns in the US could boost the US dollar.

Further reading:

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About Author

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.