EUR/USD Forecast Oct. 12-16 – Surging euro punches past 1.19

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EUR/USD continues to rally, as the pair recorded gains of 1.0% last week. There are four events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD. 
Services PMIs remained in contraction territory in Spain, France and Italy, with readings below the 50-level. Germany’s PMI was revised upwards to 50.6 from 49.1, which shows stagnation. The eurozone reading was also revised upwards, from 47.6  to 48.0 points. Eurozone retail sales were unexpectedly strong, with a gain of 4.4%. The estimate stood at 2.4%. In Germany, Factory Orders posted a gain of 4.5%, but Industrial Production came in at -0.2%. In the ECB minutes, policymakers expressed concerned over falling inflation as well as the high value of the euro, saying that the strong euro could hamper inflation and growth.
In the US, the ISM Services PMI improved to 57.8, up from 56.9 points. The FOMC minutes expressed concern that the lack of a federal fiscal stimulus package could hinder the US recovery, which members said was moving faster than expected. A stimulus bill has been stuck in Congress and it is unlikely that a deal will be reached before the US election. The US dollar showed little reaction to the minutes, as policymakers did not provide any forward guidance on interest rate hikes.

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

  1. German Final CPI: Tuesday, 6:00. Inflation has been declining in the eurozone’s largest economy. The August reading came in at -0.1% and another decline is projected for September, with an estimate of -0.2%.
  2. German ZEW Economic Sentiment: Tuesday, 9:00. Confidence in the German economy improved to 77.4 in September, but is expected to drop to 74.1 in October.
  3. Industrial Production: Wednesday, 9:00. Industrial production slowed to 4.1 in September, down from 9.1% beforehand. The October reading is expected to come in at just 0.8%.
  4. Eurozone Inflation Report: Friday, 9:00. Deflation remains a major concern for ECB policymakers. Inflation declined by 0.2% in August and the markets are braced for a -0.3% reading in September.

EUR/USD Technical analysis

Technical lines from top to bottom:

We start with resistance at 1.2136, an important monthly line.

1.2057 has held in resistance since April 2018.

1.1974 is protecting the symbolic 1.20 level.

1.1877 is next.

1.1744 has switched to support after strong gains by EUR/USD last week.

1.1648 is next.

1.1573 (mentioned last week) has provided support since July.

1.1470 is the final support level for now.

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I am neutral on EUR/USD

The euro has looked sharp, but it more a case of dollar weakness than euro strength, as the euro economy continues to struggle. If Germany and the eurozone register weak inflation numbers, the US could recover some ground.

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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.