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EUR/USD  had a turbulent start to 2016, driven by sentiment more than anything else.  What’s next? The ECB’s meeting minutes is the big event awaiting us.  Here is an outlook for  the highlights of this week and an updated technical analysis for EUR/USD.

It was a risk on / risk off week, with the euro enjoying the risk off sentiment, or gloomy mood, to rise against most currencies. It’s safe haven role was seen almost all the time, alongside the crash in Chinese and other stocks, the slide in oil and the various geopolitical scares. The one exception to the rule was when  Inflation in the euro-zone  fell short  of expectations, risking more ECB action that could weaken the euro. In the US, the NFP report was  excellent, but with the rate hike already behind us and the gloomy mood having control, it did little to cheer the dollar against the safe haven euro.

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

EURUSD technical analysis January 11 15 2016 euro dollar fundamental

  1. Sentix Investor Confidence: Monday, 9:30. This survey of investors fell short of expectations in December with a slide to 15.7 points. Will the recent gloomy market mood push it even further down? A score of only 11.5 is on the cards now.
  2. French CPI: Wednesday, 7:45. Prices in France dropped by 0.2% in November. After the disappointing figures from Germany  we can expect more pressure from the second largest economy. A small rise of 0.1% is predicted.
  3. Industrial Production: Wednesday, 10:00. Industrial output in the euro-zone advanced by 0.6% in October. Despite the lagging release, this figure is watched. A drop of 0.2% is expected.
  4. German WPI: Thursday,  7:00. The Wholesale Price Index is yet another measure of inflation. After a drop of 0.2% in  November, another slide is likely.
  5. Eurogroup meetings: Thursday. Finance ministers of the euro-zone convene for the first time in 2016 amid  an expectation for countries to miss their deficit targets, and it’s not only Greece. Germany is spending on refugee accommodation, France on security and other countries such as Italy seem impatient with austerity. Will 2016 mark the end of austerity?
  6. ECB Meeting Minutes: Thursday, 9:00.  These are the minutes from the December meeting in which Draghi  disappointed. The ECB did cut the deposit rate by 10bp and announced an extension of the QE program as well as reinvesting proceeds, but this didn’t meet investors’ expectations, which were basically fueled by Draghi himself. Some reports claimed that he was not able to do more due to internal opposition. We’ll now learn how significant it was and in addition, see if inflation forecasts meet reality.
  7. Trade Balance: Friday, 10:00. The euro-zone enjoys a trade surplus, most prominently thanks to German exports. In the month of October, this  surplus slipped to 19.9 billion, and it could be similar now.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar  began the week by testing the bounds of the ranges, initially finding support at 1.08 (mentioned last week)..It eventually found support at 1.0710 before rising to 1.0950 before closing close to where it started the week.

Technical lines from top to bottom:

1.13 worked as support back in October and is the high line at the moment. It is followed by the swing low of 1.1220 in September which is minor resistance now.

1.1140 cushioned the pair in October.  1.1050 is the high seen in December and the next challenge on the upside.

1.10 is a round number and  significant resistance.  1.0925, which was a support line in December, is the next support line. 1.0850 was the level the pair bounce off at the dying moments of 2015.

The round level of 1.08 worked as a double bottom in December and should be watched.  1.0710 is the  next support line on the  chart after temporarily capping the pair in April 2015.  1.0630 worked as nice support in November 2015 and then switched to resistance.

It is the last line  before plunging to 1.0530, that supported the pair in April.  Below, the 12 year low of 1.0460 seen in March.

I am neutral  EUR/USD

The euro could continue enjoying safe haven flows that will balance the still ongoing impact of monetary policy divergence. This is the week preceding the ECB meeting, in which we could get further pressure on the common currency. For now, all the trouble in the world seems supportive of the euro and helping the dollar only against commodity currencies and the pound, but not against the safe haven yen and euro.

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