EUR/USD tried to move higher but eventually closed lower in a turbulent week. Final inflation figures, another speech by Draghi and the euro-group meeting stand out Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The euro-zone Sentix investor confidence advanced and also GDP was revised to the upside. ECB President Mario Draghi called on governments to do more in the week that his institution began buying corporate bonds. In the US, the dollar did manage to stage a recovery of sorts, and this was seen also in EUR/USD, that dropped from resistance.Updates:
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Employment Change: Tuesday, 9:00. This quarterly figure has been advancing for quite some time, rising 0.3% in Q4 2015. While this publication is lagging, it provides a wider overview of trends. Another rise is likely for Q1 2016: +0.2%.
- Industrial Production: Tuesday, 9:00. Also here, the publication comes after the German and French figures, but it can often surprise markets. A drop of 0.8% was recorded in March. This time a rise of 0.7% is expected.
- French Final CPI: Wednesday, 6:45. The initial read of inflation for the second largest economy has shown a rise of 0.4% in prices m/m. This will likely be confirmed now.
- Trade Balance: Wednesday, 9:00. Thanks to German exports, the euro-zone enjoys a big trade surplus. After 22.3 billion seen in March, a slightly wider surplus is likely for April. A surplus of 21.6 billion is predicted.
- Eurogroup Meetings: Thursday. The finance ministers of the euro-zone will continue talking about Greece one week ahead of the Brexit referendum. The leaders will probably try not to rock the boat ahead of the vote. The failure of the program is being denied.
- ECB Economic Bulletin: Thursday, 8:00. Two weeks after the ECB decision, we will have the full data that the members had before their eyes. It will be interesting to see if they indeed see a limited chance of deflation or rather a worse situation.
- Inflation data (final): Thursday, 9:00. The initial read for the month of May showed a slight improvement: -0.1% on headline CPI and +0.8% in core CPI. A confirmation is likely but revisions are not uncommon.
- Current Account: Friday, 8:00. Similar to the trade balance figure, the wider current account is also positive, reaching 27.3 billion in March.
- Mario Draghi speaks: Friday, 15:00. The president of the ECB has another chance to move markets. Speaking in Munich, he will have the chance to respond to criticism and perhaps reflect on the first week of corporate bond buying.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar started the week trading above the 1.1335 level (mentioned last week). A move towards 1.1410 met resistance and the pair dropped back down, slipping under 1.13.
Technical lines from top to bottom:
1.1712 was the high point in August 2015 and remains high in the sky. The May 2016 high of 1.616 is certainly worth watching.
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.
1.1175 was the low point in the mid-May fall. 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. 1.0960, which worked in the past as resistance, provided a cushion for the pair in February. 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.
I am bearish on EUR/USD
Fears of a Brexit take a toll also on the common currency, and this could continue for another week. In addition, while the Fed is not expected to hike, the next move remains to the upside in the US while Europe is not getting closer to solving its problems as we may see again in the Eurogroup meetings. Also Draghi is back and this time he may up the ante.
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