EUR/USD consolidated its gains from the previous week, unable to pick a new direction just yet. The rate decision and its accompanying press conference, as well as final PMIs are the highlights of this week. Check out these events and more as well as an updated technical analysis for EUR/USD. The German elections saw a victory for Merkel, but the lack of a clear majority now puts the euro-zone’s locomotive in a long period of coalition negotiations and uncertainty. Positive news came from climbing services PMI’s but the disappointing German business confidence reading. With somewhat tighter conditions in financial markets, will Draghi follow through and announce a new liquidity program (LTRO) for European banks? In the US, the due dates for a government shutdown and even a technical default due to the debt ceiling are getting closer, and this weighs on the dollar. What’s the next move for the pair? Let’s start. [do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily graph with support and resistance lines on it. Click to enlarge: German Retail Sales: Monday.6:00. German retail sales unexpectedly narrowed by 1.4% in July, following another decline of 0.8% in the previous month, signaling a shaky recovery in Europe’s largest economy. Economists projected an increase of 0.5%. However on a yearly base, sales climbed 2.3% from a year earlier. However despite this decline which could be explained by higher food prices, everything else looks positive and German business sentiment constantly improves. A rise of 0.9% is expected. CPI Flash Estimate: Monday, 9:00. CPI flash estimate in the Eurozone retreated to 1.3% in August from 1.6%, in the previous month, remaining below the ECB’s 2.0% target. However despite the encouraging signs of recovery in the Eurozone, investors are awaiting to see the outcome of Germany’s elections and its effect on the Euro. The CPI flash estimate is predicted to remain at 1.3%. Manufacturing PMIs: Tuesday. Markit release of the Euro-area manufacturing sector in August revealed an improvement. Italy and Spain showed higher activity, following nearly two years of contraction. Final manufacturing PMI in the Euro zone reached 51.4 in August from 51.3 in July. Italian manufacturing PMI came in at 51.3 in August from 50.4 in July, while the Spanish manufacturing crossed the 50 point line to expansion, reaching 51.1 in August, following 49.8 a month ago. These positive results provide further backing that Euro zone’s economy, has pulled out of recession. Manufacturing sector in Spain is expected to expand to 51.6, Italian manufacturing to 51.2, and the Eurozone manufacturing to 51.1. German Unemployment Change: Tuesday, 7:55. German unemployment increased by seven thousand in July, missing predictions for a 5,000 contraction. Nevertheless, unemployment rate remained at 6.8% in August. German economy reported a 0.7% growth in the second quarter; however, the Bundesbank cut the annual growth forecast for 2013 in June to 0.3%, despite predicting a gradual recovery for the rest of the year. A drop of 5,000 claims is expected now. Unemployment Rate: Tuesday, 9:00. Despite growing optimism in the Eurozone’s economy, unemployment rate remained stubbornly high in the bloc’s weaker countries, highlighted the gap between north from the struggling south. Overall unemployment remained at a record high of 12.1%. There is a huge difference in jobless rates between countries such as Germany, where the job market is robust, and Greece or Spain where more than one in four workers have no job. Therefore, despite the recovery trend in the Euro-area, the central bank must remain in strongly accommodative mode for the foreseeable future. No change in unemployment rate is expected. Spanish Unemployment Change: Wednesday, 7:00. Spanish unemployment remained nearly unchanged in August at 4.7 million, while economists projected a 5,200 contraction. The slight improvement was due to an increase in the number of tourist visits in July. Growth rate is expected to be flat or may reach 0.2% in the third and fourth quarters. Unemployment in Spain is projected to grow by 12,300 this time. Rate decision and press conference: Wednesday, 11:45. European Central Bank President Mario Draghi is ready to deploy another long-term refinancing operation to provide funding to Europe’s banking system if required. Excess liquidity in the financial system is approaching the 200 billion-euro ($270 billion) level the ECB has previously signaled as a lower limit. The ECB has also tried to keep money-market rates unchanged by issuing forward guidance on its official interest rates, saying that they will remain where they are or lower for an extended period. No change in rates is expected. Services PMIs: Thursday. Italy’s service sector edged up less than expected in August reaching 48.8, from 48.7 in July, still in contraction, despite the sign of recovery reflected in the manufacturing sector’s PMI. The data indicates weak domestic demand is weighing on service sector. Meanwhile, Spanish service sector climbed to 50.4 crossing to expansion, following 48.5 in the previous month. Spain’s economy has been in recession since mid-2011, the second since a decade-long property bubble burst in 2008, though the government has said it expects to see quarterly growth in the second half of 2013. Meanwhile, Eurozone Service sector edged up to 50.7 in August, from 49.8 in July, indicated a return to growth for the Eurozone service sector, ending a one-and-a-half year sequence of contraction. Service sector in Spain is expected to reach 50.9, Italian to 49.3 and the Eurozone service sector to 52.1. Retail Sales: Thursday, 9:00. Retail sales in the Eurozone increased 0.1% month in July following a 0.7% contraction in the previous month. From July 2012, retail sales declined 1.3% in the 17-member currency union. Among reporting countries, retail sales dropped in eight countries and rose in 14. A rise of 0.3% is anticipated. German PPI: Friday, 6:00. Price inflation weakened unexpectedly in July, missing economists’ forecast for an increase of 0.2%. The producer price index moved up 0.5% on an annual basis in July, following a 0.6% gain in the previous month. The drop occurred due to a fall in the prices of in intermediate goods, which decreased by 1% from July 2012. A small increase of 0.1% is expected now. *All times are GMT EUR/USD Technical Analysis Euro/dollar kicked off the week with an initial move higher, but eventually fell into range trading, between 1.3460 and 1.3570 (mentioned last week). It finally closed at 1.3520, slightly lower than the previous close. Technical lines from top to bottom: 1.3940 was a peak in September 2011, two years ago, and is just before the round number of 1.40. 1.3870 capped the pair during the fall of 2011 and served as the “shoulders” in a H&S pattern. 1.38 is a round number and also worked as a temporary cap during that period of time. 1.3710 was the 2013 peak, and is getting closer. The line is the next big target.1.3650 temporarily capped the pair during that period of time. 1.3570 is the swing high of September 2013 and also proved itself as resistance afterwards. 1.35 is a nice round number and a pivotal line or “magnet” within the range. 1.3460 worked as support in late September and should be watched for any downside moves. 1.3415 was the peak back in June and works as another line of support. 1.3325 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. It is followed by 1.3050, which proved be strong support in May 2013, defending the round number in more than one occasion, but it is less significant now. The very round 1.30 line was a tough line of resistance. In addition to being a round number, it also served as strong support and recently worked as a pivot line. EUR/USD holding above broken uptrend resistance The line accompanying the pair since early June was broken by the big surprise and the pair managed to stay on top of it. I remain bearish on EUR/USD There is a lot of uncertainty about the economic situation in the euro-zone: cautious talk about a “green’ recovery” was replaced with an option to supply new liquidity to banks. In Italy, the never-ending political crisis is now accompanied with missed deficit targets. And uncertainty over the German government also looms. A lot depends on Mario Draghi. If we judge from his recent testimony, he could lean to the downside. In the US, the chances of QE tapering in October don’t seem so high either (despite initial hints), but the recent USD weakness is more related to fears of a government shutdown and the US reaching its debt ceiling. The past tells us that politicians will do what they always do: cut a deal in the last moment, and this would serve as a relief for the dollar. However, some fear it could be different this time. All in all, euro-zone economic weakness could trump US political hurdles. More on EUR/USD: EUR/USD Consolidates after Hitting 7-Month High– by James Chen EURUSD: Looks To Recapture The 1.3568 Level and Beyond. – FX Tech Strategy 5 Most Predictable Currency Pairs – Q4 2013 If you are interested a different way of trading currencies, check out the weekly binary options setups, including EUR/USD and more. Further reading: 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 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 Italian government collapsed – EUR/USD could start lower Yohay Elam 9 years EUR/USD consolidated its gains from the previous week, unable to pick a new direction just yet. The rate decision and its accompanying press conference, as well as final PMIs are the highlights of this week. Check out these events and more as well as an updated technical analysis for EUR/USD. The German elections saw a victory for Merkel, but the lack of a clear majority now puts the euro-zone's locomotive in a long period of coalition negotiations and uncertainty. Positive news came from climbing services PMI's but the disappointing German business confidence reading. 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