EUR/USD failed in another attempt to recover and hit 6-month lows and is already more than 900 pips off the highs. Will it find a bottom anytime soon? Preliminary inflation figures for May stand out as we turn a page into June. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Italy was at the center of European attention. Giuseppe Conte, which has no political experience, will be Prime Minister. The government’s program has been tamed, but will likely result in a high deficit, worrying markets. Spanish politics joined the list of worries. Spain’s opposition tabled a no-confidence motion after the ruling PP party was convicted of corruption. Euro flash PMI data came out mostly below expectations and implies that the slowdown extends well into the second quarter. The ECB Meeting Minutes reiterated the same cautious messages seen in the rate decision. In the US, the Fed minutes showed that the Fed will allow for somewhat higher inflation, but they cemented the June rate hike. The US dollar also enjoyed the risk-off sentiment that is a result of trade fears. Trump’s decision to cancel the meeting with Kim Jong-un weighed on markets but had little impact on EUR/USD.Updates:
- Jun 1, 15:29: The Leaker in Chief pulls the rug under the NFP: US President Donald Trump tweeted an optimistic tweet ahead of the NFP. The tweet triggered a mini “buy the rumor,...
- Jun 1, 13:22: EUR/USD unlikely to stay calm for too long: The EUR/USD is trading steadily in range after a few turbulent days. All eyes are on the US Non-Farm Payrolls...
- Jun 1, 10:17: EUR/USD may find it easier to fall than to rise around the NFP: The EUR/USD is trading in a tense range as a turbulent week draws to a close and the US Non-Farm...
- May 31, 19:06: EUR/USD: 2 Key Factors For Upbeat View In H2 Targeting A Move To 1.28 – TD: EUR/USD has made a recovery of sorts, moving from the abyss of 1.1510. Can it go even higher? Here is...
- May 31, 11:13: Can EUR/USD continue higher after the 200-pip run?: The EUR/USD extends its recovery and is already 200 pips above the lows. Upbeat economic data and fewer fears about...
- May 31, 10:12: EUR/USD upside unleashed – next hurdle only 1.1780: The EUR/USD is already 200 pips off the lows and in a recovery that cannot be described as a dead...
- May 30, 21:46: 5 reasons why the EUR/USD made a huge turnaround: The EUR/USD is over 150 pips from the 10-month lows seen on Tuesday. A mix of economic and political events...
- May 30, 21:02: EUR/USD: Only 3 Big Figures Of Risk-Premium Priced In; Scope For Lower Extension – BTMU: EUR/USD staged an impressive recovery from the lows. But can it continue forward? Here are some doubts. Here is their...
- May 30, 13:39: EUR/USD rally may be reaching its limits at 1.1650: The EUR/USD is on the rising, staging a significant recovery and battling 1.1600. In the past, such movements have been...
- May 30, 9:21: EUR/USD recovers, may be temporary, awaiting Italy: The EUR/USD is recovering, also enjoying upbeat figures for a change. The Italian constitutional crisis that engulfed global markets is...
- May 30, 6:27: EUR/USD: To Stay Below 1.20 For Longer; Next Key Support At 1.1479 – Danske: The euro continues suffering from the Italian constitutional crisis but holds above 1.1500 for now. Here is their view, courtesy...
- May 29, 17:21: 9 questions and answers about a potential Italian exit of the euro-zone: Italy’s political crisis triggered the worst sell-off of bonds since the height of the crisis and a sharp fall in...
- May 29, 12:05: EUR/USD: 1000 pips, 10-month low, and one George Soros: The EUR/USD is trading at the lowest levels since July 2017 and is more than 1,000 off the highs. The...
- May 28, 9:26: EUR/USD runs into resistance after the Italian recovery: The EUR/USD kicked off the week with a jump to the upside on the failure to form a populist government...
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Monetary data: Tuesday, 8:00. The significant slowdown in M3 Money Supply, or money in circulation, must be a worry tot he European Central Bank. It slowed down to 3.7% y/y in March. On the other hand, Private Loans accelerated to 3%. We will now get the figures for April. M3 Money Supply is expected to accelerate to 3.9% y/y and private loans to 3.2% this time.
- German Retail Sales: Wednesday, 6:00. One of the more disappointing data points of late was retail sales in Germany. After a drop of 0.6% in March, a bounce of 0.5% is predicted for April. There are some tentative signs of a Spring pickup, and this figure would need to rise as well.
- German CPI: Wednesday, during the morning, and the all-German figure at 12:00. Germany is Europe’s largest economy and changes in its inflation has a significant impact on the whole euro-zone. Prices remained flat in April, falling short of expectations and leading to a weak final read of 1.2% y/y in the euro-zone. We will now get the preliminary figures for May. A monthly rise of 0.3% is on the cards this time.
- French Consumer Spending: Wednesday, 6:45. France, the eurozone’s second-largest economy, has seen slow growth in consumer spending in March: only 0.1%. A rise of 0.2% is on the cards this time.
- French GDP: Wednesday, 6:45. The initial read for French GDP growth in the first quarter of 2018 showed a modest rate of 0.3%. The update is expected to confirm the early estimates.
- Spanish CPI: Wednesday, 7:00. Spain, the zone’s fourth-largest economy, saw a further deceleration in y/y growth in April: 1.1%. The figure feeds into the all-European data. A significant jump to 1.7% is forecast for the preliminary read for May.
- German Unemployment Change: Wednesday, 7:55. Germany’s strong economy sees a persistent drop in the number of the unemployed. A drop of 7,000 was recorded in May. The data for April will also likely show a slide in the number of the jobless. A fall of 10K is expected.
- French CPI: Thursday, 6:45. France saw prices rise by 0.1% m/m, faster than Germany, but still very slow. The preliminary figures for May will serve as the last hint before the all-European data. Another rise of 0.2% is expected.
- Inflation data: Thursday, 9:00. As with other figures, also inflation decelerated in the euro area, with 1.2% on the headline and 0.7% on the core. The early Easter holiday probably contributed to the dip, so a slight pickup may be seen in this preliminary estimate for May. If prices remain low, the ECB could take its time with ending the QE program and raising rates. A bounce higher is on the cards: 1.6% in headline inflation and 1% in core inflation.
- Unemployment Rate: Thursday, 9:00. The unemployment rate in the 19-country bloc has been dropping steadily but got stuck at 8.5% in March. A similar number is likely in April. The rate was above 12% in 2013. A drop to 8.4% is on the cards.
- Manufacturing PMI: Friday morning: Spain at 7:15, Italy at 7:45, final French figure at 7:50, final German number at 7:55 and final euro-zone measure at 8:00. Markit’s forward-looking purchasing managers’ index for the manufacturing sector stood at 54.4 points in Spain in April, above the 50-point threshold separating expansion from contraction but reflecting not-so-fast growth. A minor drop to 54.2 is expected. Italy had a level of 53.5 points. A slide to 53 points is projected. The preliminary figure for France for May showed a score of 55.1, Germany had 56.8, and the whole euro-zone had 55.5 points. Expectations are for a confirmation of the flash numbers, but revisions are quite common.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar initially challenged the 1.1820 level (mentioned last week) but then collapsed and fell below 1.17.
Technical lines from top to bottom:
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.
The round number of 1.19 is also notable as a pivotal line in the range and it also temporarily held the pair back in late 2017.
Further down, the 1.1820 level was a stubborn support line in late 2017. 1.1750 is a low point recorded in mid-May.
1.1720 is a veteran line that worked in both directions, last seen in November. 1.1676 was a temporary low point in late May.
Lower, 1.1630 was a pivotal line in November and 1.1550 was the trough around that time.
I remain bearish on EUR/USD
Everything is going against EUR/USD: Italian politics, hard and soft euro-zone indicators and the restless US Dollar. The full effect of the geopolitical deterioration and the worsening of trade tensions still isn’t felt.
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