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Important releases of inflation and unemployment are due from Germany and then from the whole continent, in a busy week for the Euro. Here’s an outlook for the events that will move the Euro and an updated technical analysis for EUR/USD.

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

eur usd forecast

The echoes of the bank stress tests will still affect the Euro, and so will the US dollar’s weakness. Where do you think the pair will go? Let’s start:

  1. GfK German Consumer Climate: Published on Monday at 6:00 GMT. This important survey of 2000 consumers has been very stable in recent months, reflecting the good situation in Germany compared to other Euro-zone countries. After remaining unchanged at 3.5 points, this indicator is expected to edge up and support the Euro.
  2. M3 Money Supply: Published on Tuesday at 8:00 GMT. The amount of money in circulation dropped in the past 6 out of 7 months, exposing the weakness of the European economies and the slowdown. Another drop of about 0.2%, like last month, is likely now, hurting the Euro.
  3. German Prelim CPI: Published on Wednesday. After a rise of 0.5% in March, this key inflation figure returned to normal and treaded water around 0%. The rise of 0.1% seen in the past two months will probably repeat itself for a third consecutive month. Note that the different German states release their CPI results during the day, so the impact can be long.
  4. German Unemployment Change: Published on Thursday at 7:55 GMT. The number of unemployed people in Germany dropped during most of the past year, usually beating economists’ expectations, which tended to be more pessimistic. The locomotive of the Euro zone will probably show another improvement in employment – another drop in unemployment, of around 20,000 people.
  5. German Retail Sales: Published on Friday at 6:00 GMT. Germany has seen rather strong fluctuations in retail sales, with drops and rises intertwining. After a 0.4% rise last month, a stall is expected now. The data for the month of June could surprise, as this was the month after the big economic turmoil in May.
  6. CPI Flash Estimate: Published on Friday at 9:00 GMT. Two days after  Germany released its CPI, the initial estimation for the whole continent is due. Inflation has rise to a peak of 1.6% (annualized) but then fell to 1.4%. These small rises in consumer prices aren’t inflationary. Only a rise above 2% will trigger thoughts of a rate hike and will boost the Euro.
  7. Unemployment Rate: Published on Friday at 9:00 GMT. Contrary to Germany, the unemployment rate in other Euro-zone countries is high, with Spain having an unemployment rate of about 20%. The rate for the Euro-zone now stands at 10%, having very similar levels throughout the year. This will probably remain unchanged, weakening the Euro once again.

EUR/USD Technical Analysis

The Euro ranged between the stubborn 1.30 line and the 1.2880 line at the beginning of the week, before dropping to support at 1.2720. After a mad Friday with the stress tests, the pair managed to close above 1.2880, at 1.2907, closing the week almost unchanged.

Some lines have been added on last week’s outlook. The pair remains in the 1.2880 to 1.30 range, like last week. The round number of 1.30 is becoming a very tough line of resistance.

A break above 1.30 will open the road to 1.3110 which supported Euro/Dollar before the collapse in May, and capped an attempt to recover. Above, 1.3267 was also a line of support that turned into resistance.

Even higher, 1.3435 was a strong line of support at the beginning of the year, and it’s followed by 1.37, which was a peak in April.

Looking down, 1.2720 which supported the pair in the past week provides immediate, minor support. The next support line is very close – at 1.2670, which was a peak of a recovery attempt in May.

Lower, 1.2520 is a minor support line, working as such at the beginning of the month, and it’s followed by 1.2460, that provided resistance in June. There are more lines below, with 1.2150 being the most notable one.

I remain neutral on EUR/USD.

While other pairs rally against the dollar, the Euro fails to break 1.30 and isn’t impressed from the stress tests, that didn’t really cope with the real issues – sovereign debt. On the other hand, the continent saw genuine positive figures, with Germany leading the pack. All this means more range trading.

Here are additional Euro Dollar analyses from excellent writers on the web:

  • Sophia Todorova, on Casey’s site, sees the EUR/USD bears sharpening their claws.
  • A Ganti, on James Chen’s site, analyzes the delicate state of the Euro – between the European rock and a US hard place.
  • Mohammed Isah sees the pair maintaining the corrective tone.
  • Kathy Lien gave a TV interview about the stress tests before they happened. Her analysis proved correct.
  • Andrei marks the support and resistance lines awaiting the pair.
  • The Geek Knows reviews the week and looks forward.

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