Looking for the latest outlook, for the current week? Check out the section: EUR/USD Forecast.
Europe is now officially out of recession but still not feeling inflation that will cause a rate hike. This week’s inflation figures, and many other events will shape the direction of the Euro. Will the Euro reach new ground, or will it panic again? Here’s an outlook for this weeks events, and an updated technical analysis.
EUR/USD forex chart with support and resistance lines marked on it:. Click to enlarge:
Apart from the European CPI, repeated speeches by Jean-Claude Trichet and Axel Weber will impact the Euro this week. Let’s review the events in Euroland. A technical analysis follows:
- Axel Weber talks: As the president of the continent’s largest economy, Axel Weber is an influential member of the ECB. His words move the Euro every once in a while. This week, he’ll be speaking in two separate events: the first is on Monday at 8:40 GMT, and the second is on Friday at 8:00 GMT. The second speech, which will focus on the exit strategy from the crisis, is more important.
- Consumer Price Index: Europe is still suffering from deflation, with drops in prices in the past 4 months. An annualized drop of 0.1% is expected this time. This is based on data that has already been released by Germany and France. Core CPI is expected to remain stable, at an annual rate of 1.2% A higher result will give the Euro the necessary fuel it’s missing. Published on Monday at 10:00 GMT.
- Trade Balance: Europe usually enjoys a surplus in its trade balance. But this time, based on German and French releases, Europe’s trade balance is expected to show a deficit of 1 billion Euros – the same scale of last month’s surplus. Published on Tuesday at 10:00 GMT.
- Jean-Claude Trichet talks: The president of the European Central Bank sometimes slips a worried call that shakes the markets, although he’s been rather mild in the last rate decision. This week, he’ll speak in three events: the first is on Wednesday at 8:40 GMT, the second, that focuses on monetary policy, will take place on Thursday at 16:00 GMT is of higher importance, and the third one is about the exit strategy to the crisis, and will happen on Friday at 10:30 GMT – probably the most important speech.
- Current Account: Contrary to the trade balance release, the current account (containing also services and cash flows) is expected to turn positive, going from a deficit of 1.3 billion last month to a surplus of 0.6 billion this time. Published on Wednesday at 9:00 GMT.
- German PPI: Producer price index is another look at Europe’s deflation. Germany has posted a drop in producer prices in 7 of 9 months this year. After a monthly drop of 0.5% last month, economists are expecting a rise of 0.1% this time. Published on Friday at 7:00 GMT.
EUR/USD Technical Analysis
The Euro began the week with a nice rise above 1.50, touching the YTD high (1.5060). It later gave in to some dollar strength, and also due to banking problems in Europe as Macro Man reports and fell down to 1.4818. It later recovered, especially due to good GDP, and closed the week at 1.49, a little higher than last week.
I’ve adjusted the support and resistance lines from last week’s EUR/USD outlook. Looking down, last week’s bottom of 1.4818 serves as the first support line. Further below, the 1.4444 line serves as major support. It worked as a strong resistance line during the summer.
Looking up, the YTD high of 1.5160 was reaffirmed this week as a serious resistance line. Further up, 1.5144 was a place that EUR/USD rested upon when going up in 2008.
Even higher, a rising Euro (and a falling dollar) will meet 1.5283, which was a support line when the Euro traded in a very high range during the summer of 2008.
For more technical analyses about this pair, I recommend reading the following articles on the web:
- Casey Stubbs, showing a head-and-shoulders pattern in EUR/USD.
- Mohammed Isah writes that a close under 1.50 causes a risk for the downside.
- The Geek Who Knows which has an interesting weekly overview of the pair.
- James Chen, in his chart of the day, shows the uptrend channel in which EUR/USD is trading.
I’m now very slightly bullish on the pair.
The renewed fall of the dollar now allows for Europe’s slow and steady recovery to impact the currency as well. Europe is now out of recession.
Further reading:
- For a broad view of all the week’s major event in all currencies, read the forex weekly outlook.
- For the Euro, read the EUR USD Forecast.
- For GBP/USD, look into the British Pound forecast.
- For the Australian dollar, read the AUD/USD forecast.
- For USD/CAD, check out the Canadian dollar forecast.
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