EUR/USD traded in a narrow range for long periods, a feat unseen for a long time, but eventually made a nice move higher. Greece remains in the limelight, but we also have the first ECB meeting minutes, PMIs and other events to move the common currency. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Greece was left, front and center. Tough rhetoric was heard from both sides around the Eurogroup meeting. Greece seems to be willing to compromise on some aspects but still wants a change in debt repayment. Germany seems willing only to change the word “troika” but offers a tough stance. This might change after elections in Hamburg. Data continued beating expectations, with strong German growth standing out. Is the weaker euro already bearing fruit? In the US, the strength that followed the NFP faded when both retail sales and consumer confidence disappointed.[do action=”autoupdate” tag=”EURUSDUpdate”/]
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Eurogroup meetings: Monday. This is an ordinary meeting of the euro-zone finance ministers, contrary to the extraordinary one. Officially, this is the last opportunity for Greece to ask for an extension of the bailout that expires at the end of the month, yet another deadline. Will Germany show more compassion after the Hamburg state elections already belong to the past? Any headlines coming out of Brussels will rock the euro. It’s important to note that negotiations are probably going on through the weekend.
- Bundesbank Monthly Report: Monday, 11:00. Germany’s central bank publishes monthly assessments of the local and euro-zone economies, talking about inflation, employment and growth. Recently, forecasts have been upgraded, with some building on the weakness of the euro. Will we see some optimism from the conservative institution?
- German ZEW Economic Sentiment: Tuesday, 10:00. This early publication of the mood in Germany’s business community. In the past 3 months, the 275 strong survey has been on the rise, reaching 48.4 points in January. Another tick up is likely for the month of February, to 56.2. The all-European number is also due to rise from 45.2 points to 51.3 this time.
- French CPI: Thursday, 7:45. The continent’s second largest economy has seen a gain of 0.1% in prices for the month of December, but is now set to plunge 0.9%.. Its publication for January feeds into the final all-European number. The preliminary release showed deeper deflation in the euro area.
- Current Account: Thursday, 9:00. The total balance of payments in the euro-zone remains positive, led by Germany. This supports the common currency. After a surplus of 18.1 billion in November, a slightly higher number is on the cards for December: 23.3 billion.
- ECB Meeting Minutes: Thursday, 12:30. The European Central Bank publishes minutes from the meeting for the first time ever. This was in discussions for a long time, as members tried to maintain a balance between speaking freely and providing transparency. The minutes are not expected to include names and/or countries of who said what, but rather a Fed style mention of “a few”, “some”, etc., in order to reflect the various opinions. Nevertheless, it is no secret that German members opposed the decision on QE that was made in the last meeting. This was stated by them and Draghi made clear there was no unanimous decision on this topic. It will be interesting to see how the members of the Governing Council see the economies of the euro-zone.
- Consumer Confidence: Thursday, 15:00. This official Eurostat survey of 2300 consumers surprised with an advance to -9 points in December, better than the -10 to -12 range seen beforehand. This is probably a result of lower oil prices and perhaps the holiday season. A similar number is expected now: -8 points.
- German PPI: Friday, 7:00. Europe’s locomotive has seen depressed producer prices for quite some time. A big drop of 0.7% was seen in December, and a smaller drop is on the cards now: -0.3%.
- Flash PMIs: Friday: France at 8:00, Germany at 8:30 and the whole euro-zone at 9:00. These are preliminary numbers for February. According to Markit’s forward looking indices, France is still in contraction zone with 49.2 points in manufacturing and 49.5 in services. This is below the 50 point threshold separating growth and contraction and only minor improvements are predicted now: 49.7 and 49.9 respectively. Germany is experiencing minimal growth in manufacturing, with 50.9 points and somewhat stronger expansion in the services sector with 52.7 points. Manufacturing is predicted to rise to 51.8 and services to 54.3. The whole euro-zone is seeing numbers similar to Germany’s: 51 in manufacturing and 52.3 in services. Advances to 51.6 and 53.2 are on the cards now.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar began the week with steady range trading around the 1.13 level. It then made a move above 1.1373 (mentioned last week) – a move that proved decisive. After peaking above 1.1440, the pair fell to support and closed at 1.1390.
Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]
Technical lines from top to bottom:
The post crisis low of 1.1867, should be watched. 1.1750 was a low point the pair reached in a breakdown in early January 2015. The round number of 1.17 was the launch value of the pair in 1999 and has a symbolic meaning.
Below, we have the post Swiss bounce of 1.1650 which worked as resistance. Lower, 1.1540 provided support in mid January.
Below the round number of 1.15 we have the pre-QE low of 1.1460 that could work as resistance.
1.1373 was the low line seen in November 2003 and proved to work as resistance and support lately. Below the initial low point of 1.1313 we have 1.1270, which provided support twice in February 2015.
The round number of 1.12 is now the pivotal line in the range. It is followed by the fresh low of 1.1113 which is nearly 0.90 on USD/EUR.
The next line is the round 1.10. It is followed by 1.0760, which was the low point in both July and August 2003.
Below this point we have the round numbers of 1.05 and 1 – EUR/USD parity, which is already eyed by some analysts.
I am bullish on EUR/USD
While the general direction is affected by monetary policy divergence and remains to the downside, there are reasons to expect a positive week for the euro: we could see some kind of resolution to the current Greek crisis: a can kicking exercise will be welcomed by markets. In addition, the euro-zone economies are already reaping the benefits from the weaker euro, and this could be seen in the various surveys. In the US, the meeting minutes from the Fed could balance the statement – thus being more dovish.
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