EUR/USD had a hangover after Easter and it retreated from the higher range.The ECB meeting is the big event of the week, but not the only one Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Worries about Greece’s ability to pay the IMF didn’t peter out even as Greece paid. Worries about the country’s finances persist. This was coupled with not-so-good data from Germany for a change. The US data released after the NFP was already better, with a good read for the services sector. This helped the greenback recover, together. Yet the FOMC minutes sparked the greenback comeback as markets focused on the talk about a hike in June, ignoring the fact that it represented only a few members’ opinions and that the meeting was held well before the weak NFP. The result was a plunge of the pair under 1.06. Will it now challenge the 12 year lows?
[do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- German WPI: Tuesday, 6:00. The Wholesale Price Index serves as another measure of inflation at the very beginning of the cycle. A read of +0.5% was seen in February after 4 months of falls. Another small rise is predicted for March.
- Industrial Production: Tuesday, 9:00. The euro-zone’s industrial output is published after the data is out for the biggest countries, but it still has an impact. After a slide of 0.1% in January, a small rise is likely for February: +0.2%.
- German Final CPI: Wednesday, 6:00. The first read of March CPI inflation showed a rise of 0.5% m/m in prices, more than expected. This will likely be confirmed now.
- French CPI: Wednesday, 6:45. The continent’s second largest economy saw a rebound of 0.7% in prices in February. The figure for March will likely show the same rise of 0.7%.
- Trade Balance: Wednesday, 9:00. This time, data is released for both January and February. In December, the surplus released 21.3 billion, driven mostly by German exports. Similar figures are expected for the first two months of 2015, also because of the weak euro: above 20 billion.
- Rate Decision: Wednesday, decision at 11:45, press conference at 12:30. In the last meeting by the ECB in early March, Draghi showed determination in implementing the QE program announced in January. Implementation has begun and it is going well. The Bank made it clear that success of the euro-zone in general and particularly regarding inflation depends on full implementation. Will he continue the same determination? If so, the euro would feel the weight. If optimism rises due to the recent signs of growth, we could see the common currency rise. The interest rate is expected to remain unchanged at 0.05% with a negative deposit rate of 0.20%. The latter serves as the lower bar for buying bonds in the QE program.
- Current Account: Friday, 8:00. Similar to the trade balance, also the current account enjoys the lower exchange rate. A surplus of 29.4 billion was recorded in January. A similar figure is expected now: 27.4 billion.
- Final CPI: Friday, 9:00. The initial read for March showed that prices fell 0.1% in the headline number, better than expected but still deflationary. Core inflation stood at 0.6% and that isn’t too encouraging. These numbers are expected to be confirmed, but surprises are not uncommon.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar began the week with a fall to 1.0910 (mentioned last week). This line held only briefly and the pair continued its journey south. It hit a low of 1.0570, around 400 pips below the previous close before stabilizing a bit higher.
Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]
Technical lines from top to bottom:
1..1373 was the November 2003 level and it looms above. 1.1290 was a pivotal line back in January 2015 and is resistance.
The round number of 1.12 is clear resistance. It is followed by a low seen in January of 1.1113 which is nearly 0.90 on USD/EUR.
1.1050 was a high point in March 2015 and is another line of resistance before the round level 1.10. This is still a battle line.
The next line was minor support back in October 1999: 1.0910. It was resistance back then and was tested once again in March 2015. This is followed by which worked in both directions.
The next line is 1.0760, which was the low point in both July and August 2003. There isn’t much support between here and 1.0615, which worked in both directions during March 2015 and is better at support.
Another minor line is 1.0550, for a role as support in the same period of time. The very round level of 1.05 served as support during 2003.
The lowest level in over 12 years is 1.0462 and this makes it critical support.
From here on, we are at levels last seen over a decade ago. We have some support at 1.0360: this was the low point in January 2003. Further down, 1.0170 worked as resistance back in November 2012. It is close to the swing high of 1.0208 seen in July of that year.
Below this point we have the very obvious level of 1 – EUR/USD parity, which is already eyed by more and more analysts
I am bearish on EUR/USD
It seems that the downtrend has finally resumed and for the right reasons: monetary policy divergence. As the ECB continues meeting its money printing goals, weighing on the euro and sending money out of the old continent (Mexico’s 100 year euro-bond is an example), the US sees optimism. While it is easy to poke the meeting minutes, it is harder to ignore the optimism about a return of stronger US growth in the spring, and evidence begins popping. Draghi is likely to continue being determined to carry on.
In this week’s podcast, we discuss: USDown or greenback comeback? And also touch other topics:
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Further reading:
- For a broad view of all the week’s major events worldwide, read the USD outlook.
- For the Japanese yen, read the USD/JPY forecast.
- For GBP/USD (cable), look into the British Pound forecast.
- For the Australian dollar (Aussie), check out the AUD to USD forecast.
- USD/CAD (loonie), check out the Canadian dollar forecast
- For the kiwi, see the NZDUSD forecast.
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