EUR/USD recovered and rose in range after two weeks of drops, riding on the dollar’s weakness. Is it vulnerable to QE tapering in the US? German ZEW Economic Sentiment, trade balance and inflation data are the highlights of this week. Check out these events and more, on our weekly outlook and an updated technical analysis for EUR/USD. Confidence is on the rise in the Eurozone with Sentix index soaring to plus 6.5 in August from minus 4.9 in July indicating pessimism is entrenched in the euro-area. However despite this positive reading, industrial production data came out worse than expected, declining 1.5% in August. German elections are getting closer. In the US, data was generally weaker than predicted, but this will not necessarily stop the taper train. [do action=”autoupdate” tag=”EURUSDUpdate”/]EUR/USD daily graph with support and resistance lines on it. Click to enlarge: Italian Trade Balance: Monday, 8:00. Italy’s foreign trade surplus shrank in June from May, reaching â‚¬3.62 billion but was stronger than the same month last year. The Italian economy depends on external demand to return to growth and the recent improvement in the Euro-area brings positive growth to Italy’s exports. The purchasing managers’ index for manufacturing jumped to a more than two-year high of 50.4 in July, signaling expansion in the third quarter. Surplus is expected to grow to â‚¬4.13 billion. Eurozone Inflation data: Monday, 9:00. Euro Area inflation remained unchanged in July at 1.6%. in line with the ECB’s latest announcement and market forecast. However, the monthly reading recorded a drop of 0.5% from a prior of 0.1%. Meanwhile, core CPI, which excludes volatile items like food, energy, alcohol and tobacco, declined to 1.1% from 1.2% in the previous month. ECB President Mario Draghi confirmed that underlying price pressures are expected to remain “subdued “over the medium term. The ECB reduced its inflation forecast for 2013 and 2014 to 1.5% from 1.6% and 1.7% respectively. CPI is expected to gain 1.3%, while core CPI is projected to climb 1.1%. Eurozone Current Account: Tuesday, 8:00. The eurozone’s current account surplus declined to 16.9 billion euros ($22.6 billion) in June from 19.5 billion euros in May, This important indicator is closely monitored showing the ability of a country or area to pay its debts in the world. It is crucial for the long-term confidence of investors and trading partners. The eurozone’s current account surplus is expected to reach 18.3 billion euros. German ZEW Economic Sentiment: Tuesday, 9:00. The ZEW economic think tank’s survey of economic sentiment advanced to 42.0 from 36.3 in July, reaching its highest level since March, beating forecast of a 40.3 reading. The recent strong data such as the big gain in industry output in June indicate a real improvement after a long, dry spell. Greece met its fiscal targets in the first seven months while Spain and Italy’s 10-year debt risk premiums have hit their lowest in two years indicating the Eurozone is emerging from recession. A further improvement to 45.3 is expected now. ZEW Economic Sentiment: Tuesday, 9:00. The euro area ZEW economic sentiment survey for the euro zone, edged up significantly to 44 points in July from June’s 32.8, beating analysts’ expectations for a reading of 37.4 points. Industrial production improved supporting signs of recovery in the Eurozone bloc. Inflation also increased on annual bases. ZEW economic sentiment survey for the euro zone is expected to climb to 47.2. German Buba Monthly Report: Thursday, 10:00. German economic growth rebounded in the second quarter, contrary to thee stagnation in the first quarter. Economic activity increased significantly indicating the German economy has returned to its normal growth rate. German economic growth is expected to “normalize and stabilize” in the remainder of the year. Consumer Confidence: Friday, 14:00. Consumer morale in the euro zone improved to -15.6 in August, beating market consensus of -17 and climbing to its highest level in two years. This rise offers further backing to the Euro-area’s long awaited recovery. has started to recover. Improved consumer confidence followed encouraging data on business activity in the euro zone in August, which picked up faster than expected, raising expectations that the third quarter will show further improvement. A stronger reading of -14 is expected this time. *All times are GMT EUR/USD Technical Analysis Euro/dollar began the week struggling with the 1.3175 line (mentioned last week). It then climbed sharply and conquered the 1.3240 line. Attempts to rise met resistance at 1.3325, a new line on the chart. The pair ended the week just below 1.33. Technical lines from top to bottom: 1.37 was the 2013 peak, and is still far. 1.3590 capped EUR/USD back in February and is minor resistance. 1.3520 was a swing high in February, before the pair tumbled down. 1.3450 is the new peak of August 2013 and serves as the next resistance line. 1.3415 was the peak back in June and serves as a strong line of resistance, also after the break. 1.3325 worked as a double top in early September and is now a key line to the upside. 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. The pair closed very close to this line, and it will be pivotal. 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. Downtrend resistance Since mid August, a line can be seen capping the pair. A break above this line could release some steam, while a failure might send the pair downwards. I am neutral on EUR/USD Draghi is cautious on the European recovery and other officials warn that it might be temporary. These worries come for good reasons: German figures have been weaker and many countries still have a long way to go.With a third bailout for Greece now seeming inevitable and with higher uncertainty over the German elections, there are quite a few reasons to worry. However, the wild card is the Federal Reserve: tapering of 10-15 billion is becoming priced into the markets, as the general picture is positive. This will not be a huge surprise, even if it is dollar positive. However, nobody knows when the next stage will be. The tone of the statement accompanying the decision remains a mystery. In general, the US economy has an advantage over the European one and this should be reflected in a lower EUR/USD, but perhaps this will happen after the tapering and after the German elections. More on EUR/USD: EURUSD: Temporary Pull-back Within Larger Downtrend – Elliott Wave Analysis Worsening Eurozone debt levels could see September Euro sell-off– Justin Pugsley 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 Anat Dror Anat Dror Anat Dror Senior Writer I conceptualize, design and create multi-lingual websites. Apart from the technical work, my projects usually consist of writing content for these sites in English, French and Hebrew. In the past, I have built, managed and marketed an e-learning center for language studies, including moderating a live community of students. I've also worked as a community organizer Anat's Google Profile View All Post By Anat Dror EUR/USD ForecastMajors share Read Next Price Action Trading Is So Much More Than Pin Bars Guest 9 years EUR/USD recovered and rose in range after two weeks of drops, riding on the dollar's weakness. Is it vulnerable to QE tapering in the US? German ZEW Economic Sentiment, trade balance and inflation data are the highlights of this week. Check out these events and more, on our weekly outlook and an updated technical analysis for EUR/USD. Confidence is on the rise in the Eurozone with Sentix index soaring to plus 6.5 in August from minus 4.9 in July indicating pessimism is entrenched in the euro-area. 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