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EUR/USD  managed to stage a nice recovery but didn’t go too far before losing some of the gains. Has it finally bottomed out? An important German survey and final CPI are accompanied by several speeches from Mario Draghi and other events. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.

Significant drops in factory orders and industrial output in Germany  caused a lot of concern.  Also Draghi weighed in, with repeating his commitment to do whatever is necessary to tackle low inflation.  The president of the ECB also hinted that rates are not set to move before 2017. On the other side of the pond, the dollar got a significant blow from the FOMC minutes, where the central bank expressed concern about euro-zone growth and also about the strength of the dollar. However, it later  recovered, in part thanks to encouraging labor data. What’s next? Let’s start:

[do action=”autoupdate” tag=”EURUSDUpdate”/]

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

EURUSD Technical analysis October 13 17 2014 fundamental outlook and sentiment for euro dollar forex trading

  1. Mario Draghi speaks: Saturday, 16:00. The president of the ECB will give his final speech in Washington, as the long IMF meetings draw to an end. He already moved the markets from Washington by hinting that a rate hike is not due before 2017. Will he say something to trigger a  Sunday gap.
  2. Eurogroup and Ecofin meetings: Monday and Tuesday. The  finance ministers of the euro zone and later the whole EU will meet on Monday and Tuesday respectively. The growing tension between Germany that wants fiscal discipline and France that defies EU guidelines, is a hot topic. Also the recent ECB measures as well as the exchange rate are certainly topics that we’ll hear about, even if they are not necessarily on the agenda. Comments from various members are set to move markets.
  3. French CPI: Tuesday, 6:45. Europe’s second largest economy saw a  monthly price rise of 0.4% in August and September’s number is  needed for the final CPI for the whole euro-zone.
  4. German ZEW Economic Sentiment: Tuesday, 9:00. This  early survey of analysts and institutional investors has been declining since the beginning of the year, reaching 6.9 points in September. Another slide is expected now, especially in light of the poor economic data coming out of Germany lately. The all-European figure hit 14.2 points in  September and is also expected to slide.
  5. Industrial Production: Tuesday, 9:00. Output rose by 1% in July in the euro-zone, but saw a sharp fall in August, if we learn from the data already released by the “locomotive”, Germany. A significant drop could certainly hit the common currency.
  6. German Final CPI: Wednesday, 6:00. Germany reported no change in prices in the preliminary release for September. This will likely be confirmed now. Year over year, the figure stands at 0.8%, above the euro-zone level, but very far from the ECB’s target.
  7. Mario Draghi talks: Wednesday, 7:00 and 18:00. Back to the ECB HQ in Frankfurt, Draghi is scheduled to make two speeches in two  separate events. At this point we will already have the industrial output number for the euro-zone (it was poor for Germany) as well as some news from the meeting of the financial chiefs. Draghi moves the markets even if he doesn’t say anything new.
  8. Bundesbank Monthly Report: Wednesday, 10:00. The German central bank is likely to cast a darker picture of the German and euro-zone economies and its forecasts always have an influence. The  so called “Buba” has been somewhat marginalized in the recent ECB decisions, that weren’t to its liking.
  9. Final CPI: Thursday, 9:00. According to the preliminary release, CPI hit 0.3% y/y and core CPI 0.7% y/y. Both are  the lowest levels for both indicators. These numbers are expected to be  confirmed, but revisions are not uncommon.
  10. Trade Balance: Thursday, 9:00. One of the things that kept the euro bid and battled the bad news was the zone’s wide trade surplus. After a positive figure of 12.2 billion in July, an even wider surplus is expected for August.
  11. German WPI: Friday, 6:00. The prices at the wholesale level provide yet another insight to the inflation  situation, and some view it as a a forward looking figure. In the past 4 months, the number  fell short of expectations, including a drop of 0.2% in prices back in August.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar started the week with a  climb up from the 1.25 level (mentioned last week) and later challenged 1.2660. The pair  eventually made a nice breakout but returned back down.

Live chart of EUR/USD: [do action=”tradingviews” pair=”EURUSD” interval=”60″/]

Technical lines from top to bottom:

We begin with the  he all important figure  of 1.30, which is more than a round number.

Below  1.30, we find support at 1.2960  which capped the pair’s recovery attempts after it fell to lower ground. The  1.2920 level was the initial low and has now turned into  strong resistance.

1.2860 a place where the pair stopped on the way down in September, and now has the opposite role. The  round number of 1.28, which also worked as support at around the same period of time is yet another line of resistance.

1.2750 was a double bottom back in July 2013. This double bottom was breached and immediately worked as resistance. 1.27 is a round number and also worked as  resistance to a recovery attempt.

This is followed by 1.2660 – a key line to the downside, which  marks the beginning of long term uptrend support. Below, 1.2570 is the initial low seen in October and now a line of resistance.

The next line is critical: of 1.25, which is USD/EUR at 0.80. The pair flirted with this line. This is key support.

Even lower, 1.2445 was a swing high in August 2012 and it is followed by 1.2385, which was stubborn resistance around the same time.

1.2250 served as support several times in that summer, and 1.2170 was the “shoulder” in the inverse H&S pattern around the same time. The last line is the 2012 low of 1.2040.

Here is another view of the recent fluctuations via the hourly chart:

EURUSD hourly chart Technical analysis October 13 17 2014 fundamental outlook and sentiment for euro dollar forex trading

I am  bearish  EUR/USD

After Draghi tried not to rock the boat in the last rate decision, he somehow let the euro recover, it seems he isn’t keen on letting the euro rise. In addition, the country that was supposed to pull the zone forward, Germany, is already feared to have entered a recession. In the US, the Fed may have been worried in September, but since then, the all important labor data in the US has only improved as seen in the excellent NFP, the  best JOLTS since 2001 and the lowest  4 week moving average in jobless claims since 2006. The dollar uptrend is intact.

In our latest podcast, we talk about the US labor market, run down the FOMC minutes, reflect on falling oil and discuss next week’s events:

Download it directly here.

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If you are interested a different way of trading currencies, check out the  weekly binary options setups, including EUR/USD and more.

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