EUR/USD Forecast October 10-14

EUR/USD  extended its range to the downside in the wake of the new quarter, but never went too far. When will it make the break? A key German survey is the highlight of the upcoming week.  Here is an outlook for  the highlights of this week and an updated technical analysis for EUR/USD.

Talk about ECB tapering triggered a jump in EUR/USD  but this did not last. It is unclear if the ECB will taper bond-buys before ending the program,  begin tapering in March or if they have even discussed it. With low inflation, the ECB’s QE could run  and run. Euro-zone PMIs  came out mostly as expected. Data in the US was OK: a small miss on the NFP  did not hurt the greenback’s momentum, especially as other figures were more upbeat. The euro was  dragged down by  pound flash crash  amid speculation the euro could be next.

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

1. German Trade Balance: Monday, 6:00. The euro-zone’s powerhouse enjoys a surplus in exports, something that keeps the euro bid. After a  trade surplus of 19.4 billion in July, August is expected to see a marginally narrower figure with 19.3 billion.
2. Sentix Investor Confidence: Monday, 8:30. This wide survey has risen from the post-Brexit abyss, surprising with a jump to 5.6 points in September. Another advance to 6.2 is on the cards now.
3. German ZEW Economic Sentiment: Tuesday, 9:00.  This early survey by ZEW disappointed back in  September  by remaining unchanged at  only 0.5 points, reflecting a lack of real optimism. Contrary to the IFO figure, this survey sees  no significant recovery in confidence. A bounce to 4.2 is projected. The all-European number carries expectations for a rise from 5.4 to 6.3 in October.
4. German WPI: Wednesday, 6:00. Wholesale prices eventually feed into retail and  consumer prices. In August, the WPI surprisingly dropped by 0.7%. A rebound of 0.3% is estimated for September.
5. French Final CPI: Wednesday, 6:45. September’s initial inflation numbers disappointed in September. In France, a drop of 0.2% was recorded. It will probably be confirmed now.
6. Industrial Production: Wednesday, 9:00. Despite being released after the French and German figures (among others), the  wider euro-area figure can surprise. After a fall of 1.1% in July, a bounce with 1.4% is predicted for August.
7. German Final CPI:  Thursday, 6:00. Prices in Germany rose by 0.1% m/m  according to the initial publication. They will likely be confirmed now.
8. Trade Balance: Friday, 9:00. Germany’s exports are mostly responsible for the high trade surprlus. No big changes are expected now: a surplus of 20.5 billion for August is expected to follow the 20 billion number  seen in July.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar  opened the quarter with an attempt to move higher, above the 1.1230 level mentioned last week  but it eventually dropped, even temporarily dipping under 1.1125.

Technical lines from top to bottom:

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 bottom bound of a higher range and then capped recovery attempts in May.  1.1230 capped the pair after the fall in May and worked as resistance.

1.1190 is the post-Brexit high seen in July. 1.1125 cushioned the pair in early September.  1.1070  served as a clear separator of ranges during February and also beforehand.

1.10 is a round number and  significant resistance. 1.0905 is the swing low seen in June and serves as a weak support. 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.

Further below, the 2016 low of 1.0520 and the 2015 low of 1.0460 provide further support.

I turn from neutral to bearish on  EUR/USD

The euro could be  next, after the tumble down of the British pound. It is important to remember that Brexit is also the EU being left out by the UK, and not only an event damaging to  Britain. In addition, the ECB is set to extend QE and the Fed has good enough data to raise rates.

Our latest podcast is titled  Bold BOJ vs. Fearful Fed

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