EUR/USD was confined to a relatively narrower range during most of the week. An important German survey and the ECB meeting minutes stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Is the Brexit effect waning in Europe? The Sentix investor confidence improved and perhaps the worst is behind us. German GDP was also looking good with a rise of 0.4% in Q2. In the US, the better-than-expected NFP continued supporting the greenback until the weak retail sales report came along. This sent EUR/USD higher, but the pair struggled to reach new ground.
[do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- German ZEW Economic Sentiment: Tuesday, 9:00. This early survey showed the impact of Brexit on the eurozone’s largest economy. The indicator fell to -6.8 points, with the negative number reflecting pessimism about the future. Will it bounce back now? Expectations stand on a positive 2.1 figure. The all-European number is projected to rise from -14.7 to -6.3 points.
- Trade Balance: Tuesday, 9:00. Te euro area’s trade balance is positive, mostly thanks to Germany’s exports. A surplus of 24.5 billion was recorded in May. We now get the data for June which is forecast to show 23.2 billion.
- Current Account: Thursday, 8:00. Similar to the narrower trade balance, the wider current account also shows a significant surplus. A positive 30.8 billion euros figure was seen in May. A slide to 27.3 is on the cards for June.
- Final CPI: Thursday, 9:00. According to the initial read for July, prices advanced by 0.2% y/y. This was slightly better than expected. Core CPI was up 0.9%. Both figures will likely be confirmed.
- ECB Meeting Minutes: Thursday, 11:30. In the latest ECB meeting, Draghi did not rock the boat. The central bank left the door open to more monetary stimulus while putting pressure on governments to act. The minutes from the meeting could shed some light on the internal discussions within the Governing Council.
- German PPI: Friday, 6:00. Producer prices eventually feed into consumer prices. Germany saw prices rising by 0.4% last time. A small rise of 0.1% is expected.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar traded above 1.1070 (mentioned last week) at the wake of the new week.
Technical lines from top to bottom:
1.1535 is a stepping stone as seen in May 2016 and also beforehand. It is followed by the very round level of 1.15.
1.1460 was a key resistance line in 2015 and 1000 above the multi-year lows. 1.1410 capped the pair in early June. 1.1375 worked as resistance in February and as support in May 2016.
1.1335 worked as the lower bound of a higher range and then capped recovery attempts in May. 1.1230 capped the pair after the fall in May and works as resistance.
1.1190 is the post-Brexit high seen in July. 1.1140 cushioned the pair in October. 1.1070 served as a clear separator of ranges during February and also beforehand.
1.10 is a round number and significant resistance. 1.0905 is the swing low seen in June and serves as a weak support. 1.0825 worked as support in early March 2015 and should also be watched. This is now a triple bottom.
The post-Draghi low 1.0780 replaces 1.08 as support. 1.0710 is the next support line on the chart after temporarily capping the pair in April 2015.
Further below, the 2016 low of 1.0520 and the 2015 low of 1.0460 provide further support.
Temporarily breaking above the downtrend channel
As the thick black lines show, the pair traded in a downtrend channel and has now broken above it. The breakout was followed by a breakdown.
I remain bearish on EUR/USD
The US dollar remains the “cleanest shirt in a dirty pile”, and the euro is far from being well positioned in this pile.
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