EUR/USD was on the back foot, as the euro gave a fight but eventually surrendered to the dollar. The ZEW Economic Sentiment, Flash Manufacturing and Services PMIs and the Spanish unemployment are the highlights of this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD. Eurozone CPI was confirmed at low levels, raising the pressure on the ECB. The central bank aims to keep inflation below but close to 2% is not concerned about deflation, but is talking about it more than ever. In the US, inflation seems somewhat more solid, and with the help of OK retail sales as well as a strong Empire State Manufacturing Index, the dollar rode higher across the board, and the euro was no exception. [do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily chart with support and resistance lines on it. Click to enlarge: German PPI : Monday, 7:00. German producer prices declined 0.1% in November following a 0.2% drop in the previous month, while analysts expected no change. PPI fell in nine of the last ten months. November’s release was 0.8 % lower on the year after a 0.7 % annual decline in October. Declines were broad-based, despite a slight acceleration in factory production yet to be seen. A rise of 0.2% is forecasted. German Buba Monthly Report: Monday, 11:00. In the last Deutsche Bundesbank report the bank projected that German economy will grow in coming months due to a boost in industrial activity and in residential construction. The fourth quarter GDP is expected to expand considerably. The central bank also increased its predictions to a 1.7% growth rate in 2014 from a 1.5%rise in its earlier estimate in June. The bank also addressed the proposed financial transaction tax in parts of the European Union, saying it will harm the repo market. German ZEW Economic Sentiment: Tuesday, 10:00. German investors mood improved sharply in December, rising by 7.4 points to 62, the highest level since April 2006. The reading beat markets expectations of a 55.3 release. Investors were optimistic regarding financial activity in 2014 both in Germany and in the Eurozone. Current economic conditions improved by 3.7 points to 32.4 reflecting an upbeat picture. Another rise to 63.4 is projected. ZEW Economic Sentiment: Tuesday, 10:00. Economic expectations for the Euro zone edged up 8.1 points in December, reaching 68.3. The results were fairly higher than analysts’ estimates of a 60.9 reading. This release was preceded by a 60.2 reading in November. Despite the low leveled inflation, economists are quite optimistic expecting the economic development in Germany and the Eurozone to improve further in 2014. A further increase to 70.2 is expected this time. Flash Manufacturing and services PMIs: Thursday. The euro zone’s manufacturing sector surged to a 31-month high in December, reaching 52.7, beating forecasts of a 51.9 reading. However, activity in the services sector declined mildly to 51 from 51.2 in November. Nevertheless, the improvement in the manufacturing sector puts recovery back on the table despite the slow expansion rate. German Manufacturing sector continued to advance in December, rising to 54.2 from 52.7 in November, higher than the 53.1 forecasted by analysts, but the service sector declined to 54 from 55.7 in the previous month, lower than the 55.2 predicted. French Manufacturing and services sectors continued to disappoint, with the manufacturing PMI falling to 47.1 from 48.4 in November, and the Services PMI down to 47.4 from 48 in the previous month, staying below the 50-mark for the 22nd consecutive month. French Manufacturing is expected to rise to 47.6, while services to 48.2; German Manufacturing is anticipated to increase to 54.7 and services to 54.1; Euro-area Manufacturing is expected to rise to 53.2 while services are expected to reach 51.5. Spanish Unemployment Rate: Thursday, 8:00. Spain’s unemployment rate fell for a second straight quarter reaching 26% following 26.3% in the second quarter, indicating Spain is slowly emerging from its long recession. Spain’s economy expanded for the first time in two years in the third quarter. However the International Monetary Fund projects Spain will suffer from an unemployment rate of more than 25% until 2018. No change is expected now. Current Account: Thursday, 9:00. The euro zone’s current-account surplus widened unexpectedly in October, to a surplus of 21.8 billion euros after narrowing in September to an upwardly revised EUR14.9 billion. The increase suggests the Euro-area is exporting more and that the manufacturing sector is constantly improving. A smaller surplus of 19.2 billion euros is forecasted now. Belgian NBB Business Climate: Friday, 14:00. Belgian business confidence edged down unexpectedly in December to -6.4 from -4.3 in November, as executives became more pessimistic about the economic outlook in the manufacturing and construction sectors. Low demand was the key reason behind this sharp fall. An improvement to -4.4 is forecasted. * All times are GMT EUR/USD Technical Analysis Euro/dollar began the week in a move towards the 1.3710 line (mentioned last week), but was unable to break higher. Its fate then turned around, and it eventually closed below the 1.3550 line that kept it afloat earlier in the year. Technical lines from top to bottom: 1.3940 was a peak in September 2011, over two years ago, and is just before the round number of 1.40. 1.3832 was the 2013 peak (excluding the post-Christmas break). The failure of the pair to get close to this line for a second time might make it a top for a long time, despite the false break. 1.38 is a round number and also worked as a temporary cap during that period of time and also in October 2013. 1.3710 was the previous 2013 peak, and served as a clear separator. The pair needed a big trigger to break above this line, and when it lost it again, the fall was painful. 1.3675 capped the pair in December and also provided some support back in October. It also stalled a recovery in January 2014 and is a key line right now. 1.3615 worked as resistance in December, as an upper bound for the range. The line is becoming weaker now. Below, 1.3550 worked as support as January 2014 and also beforehand. It is a key line to the downside. The January 2014 low of 1.3515 provides minor support on the way down. 1.3450 worked as resistance in August 2013 and as support in September and October. The round number of 1.34 worked as resistance several times in 2013, and is strengthening now. 1.3320 worked as a double top in early September and it was crossed only with a Sunday gap. It remains a clear separator of ranges. It is followed by 1.3240, which capped the pair in April and also had a role in August. It worked as support in September. 1.3175 capped the pair during July 2013. 1.3100 is worked as temporary resistance in December 2012 and is becoming more important once again, after capping a recovery attempt in June and then in July and providing support in September. Uptrend support convincingly broken From early November, the pair trended higher, riding above an uptrend support line. As mentioned last week, it was hard for the pair to hold onto the line for too long. The break below was certainly painful. I am bearish on EUR/USD Even though Germany is showing some strength, the rest of the continent is still struggling. More importantly, the specter of deflation is becoming stronger, despite all the denials. While still not priced into the price of the euro, there is a good chance that the ECB will set a negative deposit rate as early as March. In the US, the bad news from the NFP was completely forgotten as fresh positive numbers left the notion that the FOMC is going to taper once again at the end of the month. More: Forex Analysis: EUR/USD Attempts Recovery of Bullish Trend Stronger dollar in 2014, but gains could be limited If you are interested a different way of trading currencies, check out the weekly binary options setups, including EUR/USD and more. 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. Yohay Elam Yohay Elam Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts. Yohay's Google Profile View All Post By Yohay Elam EUR/USD ForecastMajors share Read Next Sterling got an 11th hour boost; Euro could suffer from David Starkey 9 years EUR/USD was on the back foot, as the euro gave a fight but eventually surrendered to the dollar. The ZEW Economic Sentiment, Flash Manufacturing and Services PMIs and the Spanish unemployment are the highlights of this week. Here is an outlook on the major events and an updated technical analysis for EUR/USD. Eurozone CPI was confirmed at low levels, raising the pressure on the ECB. The central bank aims to keep inflation below but close to 2% is not concerned about deflation, but is talking about it more than ever. 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