EUR/USD Forecast May 25-29 – Investors Await German GDP, Inflation

EUR/USD posted considerable gains last week, as the pair broke above the 1.09 level. The upcoming week has eight events, including German GDP and German and eurozone inflation. Here is an outlook at the highlights and an updated technical analysis for EUR/USD. 
German ZEW Economic Sentiment jumped to 50.0, up sharply from the previous reading of 28.2 points. This crushed the estimate of 30.0 points. Eurozone CPI posted a meager gain of 0.3%, while the core reading came in at 0.9 percent. German and eurozone PMIs climbed higher in May, pointing to an improvement in the manufacturing and services sectors. Still the readings point to continuing contraction. German Manufacturing PMI improved from 34.5 in April to 36.8 while the eurozone indicator rose from 33.4 to 39.5 points. The services sector showed improvement after a disastrous April. German Services PMI climbed from 16.2 to 31.4, while the all-eurozone indicator jumped from 12.0 to 28.7 points.
The ECB minutes of its last monetary policy meeting stated that policymakers could implement further easing at its June meeting, in order to tackle the economic fallout from the Corvid-19 outbreak. This could mean taking measures such as adjusting the Pandemic Emergency Purchase Program.
In the U.S., construction numbers softened in April. Building Permits fell to 1.07 million, down from 1.35 million. Housing starts slowed to 0.89 million, down from 0.95 million. In March, the final read for Manufacturing PMI came in at 41.5 points, and the initial estimate for April came in at 39.8 points. A reading below the 50-level points to contraction.

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

  1. German Final GDP: Monday, 6:00. Germany is the locomotive of the eurozone, but the economy has been hit hard by the Corvid-19 pandemic. The initial estimate for Q1 GDP came in at -2.2% and the final estimate is expected to confirm this release.
  2. German Ifo Business Climate: Monday, 8:00. Business climate slipped to 74.3 in April, down from 86.1 in March. The indicator fell short of the forecast of 78.3 points.
  3. German GfK Consumer Climate: Tuesday, 6:00. German consumers are in a sour mood, as the indicator sank to -23.4 in March. Analysts had expected a small decline of 1.9 points.
  4. German Prelim CPI: Thursday, All Day. German CPI posted a gain of 0.4% in April. Analysts are projecting inflation to fall to 0.1% in the initial May reading.
  5. German Retail Sales: Friday, 6:00. German consumers aren’t spending money, which could prove disastrous for the German economy. In March, retail sales contracted by 5.6 percent and April is projected to be even worse, with a forecast of 10.0 percent.
  6. French Preliminary GDP: Friday, 6:45. The eurozone’s second-largest economy contracted by 5.8% in Q1 and the second-estimate reading is expected to confirm this figure.
  7. Eurozone Monetary Data: Friday, 8:00. M3 Money Supply accelerated to an annual growth rate of 7.5% in March, up from 5.5% a month earlier. Private Loans fell to 3.4% y/y, down from 3.8%. We will now receive data for April. Money Supply is projected to rise to 7.8%, while Private Loans is expected to inch higher to 3.5% percent.
  8. Eurozone Inflation: Friday, 8:00. Eurozone inflation remains at low levels. In April, the headline figure came in at 0.3%, while core reading came in at 0.9%. The second-estimate figures are expected to confirm the initial readings.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.1215, which has held since mid-January. 1.1119 is next.

1.1025 (mentioned last week) has held in resistance since early April.

1.0900 is fluid, as the pair closed the week just above this level.

1.0829 has switched to a support role following gains by EUR/USD last week.

The round number of 1.07 saw action in mid-March, when EUR/USD showed strong volatility.

1.0620 is protecting the 1.06 level. It is the final support level for now.


I am neutral on EUR/USD

The eurozone economy continues to struggle, as economic conditions remain weak due to the fallout from Corvid-19. However, Italy and Spain have eased lockdown conditions, which should improve economic numbers.

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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.

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