Euro/dollar fell even further as the crisis deteriorated but recovered from the abyss as bold statements were made by Draghi and other figures. It is now delivery time in a very critical week for the euro. Apart from the highly anticipated rate decision, the calendar is packed with events . Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD. Greece unsurprisingly missed most of its targets, Spanish regions are falling one by one, and Italy is getting closer to elections. Unsustainable bond yields became even more unsustainable. It is always darkest before dawn, and Draghi can bring this dawn. Leaders of Germany and France joined ECB president Draghi in pledging to do everything to save the euro. The central bank has the tools to act, such as a full QE program among other options) in this dark hour and totally change the course of the debt crisis, or join the leaders by proposing only half measures and sending the euro to an even darker hour. Updates: Spanish Flash GDP continued on a downward trend, which began in Q1 of 2011. GDP declined by 0.4%, compared to a 0.3% drop in June. Euro-zone Retail PMI fell to 46.4 points. The Italian 10-year Bond Auction posted a yield of 5.96%, up from the yield earlier this month of 5.82%. German Chancellor Angela Merkel and French President FranÃ§ois Hollande issued a joint statement declaring their deep commitment to the Euro-zone. This was tempered by a statement by German Economy Minister Philipp Roesler that Germany would oppose any large government bond purchases. The euro was lower due to market doubts about the ability of the ECB to tackle the debt crisis, despite tough talk by ECB head Mario Draghi. EUR/USD was trading at 1.2254. German Retail Sales contracted by 0.1%, disappointing the markets, which had forecast a 0.6% gain. French Consumer Spending came in at 0.1%, just shy of the 0.2% estimate. German Unemployment Change was up seven thousand, better than the forecast of 9K. The Italian Monthly Unemployment Rate had a poor release, coming in at 10.8%. This was well below the market prediction of 10.2%. Euro-zone CPI Flash Estimate posted a 2.4% gain, matching the market estimate. The Euro-zone Unemployment Rate set another record, hitting 11.2%. Italian Preliminary CPI posted a flat 0.0%, below the market forecast of 0.3%. The markets remain cautious, hoping that the ECB will announce concrete action, such as steps to lower Spanish and Italian borrowing costs, which have been reaching dangerous levels. The ECB will hold a policy meeting later in the week. EUR/USD was up slightly, trading at 1.2277. For a change, there was some good news out of Spain, as Spanish Manufacturing PMI was up in the July reading. The index posted a figure of 42.3 points. Italian Manufacturing PMI came in at 44.3 points, very close to the market estimate. Euro-zone Final Manufacturing PMI posted a reading of 44.0 points, a notch below the forecast of 44.1 points. The markets will be hoping for some concrete action at the Policy Meetings being held by the Federal Reserve on Wednesday and the ECB on Thursday. The euro made slight gains, and pushed across 1.23 line. USD/EUR was trading at 1.2213. As expected, the ECB maintained its key interest rate at 0.75%. A press conference will follow the interest rate announcement. No change was made to the deposit rate. The Spanish Unemployment Change posted a reading of -27.8 thousand, the fourth straight reading in negative territory. The Spanish 10-year Bond Auction recorded an average yield of 6.65%. Euro-zone PPI declined by 0.5%, lower than the market estimate of a 0.3% drop. The euro has moved upwards, and is testing the 1.23 line. EUR/USD was trading at 1.2296. EUR/USD daily chart with support and resistance lines on it. Click to enlarge: Spanish GDP: Monday, 7:00. Spain is still the epicenter of the debt crisis, so every figure matters. And this is an important one. Spain is already in recession, having contracted for two quarters in a row, each time by 0.3%. Another quarter of negative growth is expected in Q2, this time with a drop of 0.4% in output. Tourism could have helped the country, that is otherwise at deep freeze. Retail PMI: Monday, 8:00. This measure of consumer activity through purchase managers has been in contraction zone for 8 month. The recent score of 48.3 was better than the previous two months, but a rise above 50 points, back to growth, isn’t expected for the month of July. A lower figure is more likely. Italian bond auction: Monday morning. 10 year bonds are the common benchmark for the ttrust a country has. Italy actually saw lower yields in the last auction, after crossing the 6% line twice beforehand. Given the hope in the markets, another result of bond yields under 6% is expected now. If the yield rises above 6%, it will be a worrying sign that Draghi’s words are not trusted. German Retail Sales: Tuesday, 6:00. Europe’s locomotive saw a slightly disappointing drop in the volume of sales last month: 0.3%. A rise of 0.6% is expected now. Some figures point to contagion also to Germany, but the situation there remains positive for now. French Consumer Spending: Tuesday, 6:45. The euro-zone’s second largest economy saw two consecutive months of rises in consumer spending, and it also enjoying relative stability in its bond yields. Another small rise of 0.2% is expected now. German Unemployment Change: Tuesday, 7:55. Germany disappointed with three consecutive rises in the number of unemployed people, standing out after a long period of seeing unemployment drop. A fourth rise is expected, this time of 8K. Italian unemployment rate: Tuesday, 8:00. Italy is not far behind Spain in the debt crisis, and its economy is contracting too fast. The unemployment rate is expected to remain above 10% for a third month in a row, edging up from 10.1% to 10.2%. CPI Flash Estimate: Tuesday, 9:00. The first release of CPI for the month of July is expected to remain at the same annual level of 2.4%, above the ECB’s 2% target. Given all the economic negativity, a drop in the rate cannot be ruled out. This can help the ECB take bigger steps. Unemployment Rate: Tuesday, 9:00. After standing at around 10% for nearly two years, recent months saw a rise in the euro-zone unemployment rate, that reached 11.1%. Yet another rise is expected now. There is a big divergence between the different euro-zone countries, with Spain and Greece having very high rate of over 20%, while Germany and some other countries are enjoying low unemployment rates. Spanish Manufacturing PMI: Wednesday, 7:15. This forward looking indicator of the manufacturing sector reflects the Spanish deterioration strongly: the figure stands at 41.1 points, reflecting rapid contraction, the worst since the summer of 2009. Another slide is expected. Italian Manufacturing PMI: Wednesday, 7:45. Also in the euro-zone’s fourth largest economy, manufacturing is squeezing, according to the PMI, but at least it is off the bottom. A drop from 44.6 to 44.3 is predicted now. Final Manufacturing PMI: Wednesday, 8:00. The initial release of this indicator showed a drop from 45.1 to 44.1 points. The final figure takes the Spain and Italian numbers into account, and updates for other countries. No change is expected. Spanish Unemployment Change: Thursday, 7:00. Thanks to tourism, Spain actually saw a drop in in the number of unemployed people during June, by 98.9K – a third drop in row. Tourism could have resulted in another drop in July. So is the situation improving? Probably not – this phenomenon is clearly seasonal and was seen in previous years. PPI: Thursday, 9:00. Producer prices are expected to fall for a second month, and drop by 0.3% after a slide of 0.5% beforehand. This is released just before the rate decision. Rate decision: Thursday, 11:45, press conference at 12:30. This is one of the most important decisions in a long time, and holds very high expectations after Draghi promised to do everything and said “believe me, it will matter”. The benchmark interest rate will likely remain unchanged at 0.75% after last month’s cut, but another cut is certainly on the cards. Also a shift of the deposit rate from 0% to a negative value is possible, as well as another LTRO. The ECB could also take a loss on its holdings of Greek debt. The really big thing the ECB can do is resume the SMP program: buying Spain and Italian bonds to lower their yields, enable them to fund themselves in the markets and encourage others to join in. Such a move will have a decisive impact if it is done in a large scale, and if it is done without sterilizing the buys: a full QE program. Will Draghi make this bold step? See more details for this critical event in the ECB Preview. Final Services PMI: Friday, 8:00. Note that as with the manufacturing PMI, Spain will release its number at 7:15 and Italy at 7:45, but they are of lower importance, especially after the manufacturing numbers and the rate decision. The initial figure of 47.6 points will likely be confirmed now. Retail Sales: Friday, 9:00. The volume of sales has been like a see-saw, moving from drops to rises. After a rise of 0.6% last month, a smaller rise of 0.1% is expected for the month of June. A small drop will not be a big surprise. * All times are GMT EUR/USD Technical Analysis â‚¬/$ began the week with a gap lower, falling over the 1.2150 cliff (discussed last week) It fell as low as 1.2043, before staging an impressive recovery thanks to Draghi. The close under the 1.2330 line shows that the markets are cautious. Technical lines from top to bottom: The very round 1.30 line is a very important line in case of huge rally. In addition to being a round number, it also served as strong support. 1.29 is also notable on the upside, followed by 1.2814. 1.2750 capped the pair after the Greek elections and also had a similar role in the past. It is now of higher importance. 1.2670 was a double bottom during January and was the high line of the recovery before the Greek elections in June. It also capped the pair at the beginning of July 2012. 1.2623 is the previous 2012 low and remains important despite recent battles over this line. Below, 1.2587 is a clear bottom on the weekly charts but is only a minor line now. 1.2520 had an important role in holding the pair during June, in more than one case, but it’s much weaker now. 1.2440 provided support for the pair at the same time. and worked as double bottom. It is closely followed by 1.24 that provided some resistance in June 2010 and switched to resistance in July. It is now of higher importance after capping a recovery attempt at the end of July. 1.2360 was temporary support in July 2012 but quickly switched to resistance. Further below, 1.2330 is another historical line after being the trough following the global financial meltdown in 2008. It’s stronger after working as strong support. It should be closely watched. The now previous 2012 low of 1.2288 is of higher importance now after being reached twice. 1.22 is now minor resistance, after serving as such in June 2010. 1.2144 is already a very strong line on the downside: it was a clear separator two years ago, when Greece received its first bailout. Also in July 2012, it worked as a separator. The new 2012 low of 1.2043 is the next line, although it may prove to be weak on a downfall. Next we have the 1.20 line, which is a round psychological figure. The post crisis low of 1.1876 is the final frontier before lines last seen in the good years. The launch price of 1.17 is the next line. Small downtrend Channel Broken As the chart shows, the pair made a breakout of out of the short term downtrend channel, breaking above downtrend resistance. I am neutral on EUR/USD Draghi created huge expectations with his strong words. He has the power to deliver and turn a corner in the crisis, sending the euro far higher. However, high expectations can result in big disappointments and a total plunge. Against the tools that Draghi has, there are also many obstacles, coming from German politicians and the German Bundebank. Currently, it’s hard to tell how this will end. Hopefully we will see some solutions, but recent history points to the other direction. Until Wednesday, the optimism should keep the euro well supported. Another non-QE3 decision in the US could slightly weaken the pair on Wednesday, and then it all depends on Draghi. If you have interest in a different way of trading currencies, check out the weekly binary options setups, including EUR/USD, GBP/JPY and more. 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. For the New Zealand dollar (kiwi), read the NZD forecast. For the Swiss Franc, see the USD/CHF 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 AUD/USD Outlook July 30 – August 3 Kenny Fisher 10 years Euro/dollar fell even further as the crisis deteriorated but recovered from the abyss as bold statements were made by Draghi and other figures. It is now delivery time in a very critical week for the euro. Apart from the highly anticipated rate decision, the calendar is packed with events . Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD. Greece unsurprisingly missed most of its targets, Spanish regions are falling one by one, and Italy is getting closer to elections. Unsustainable bond yields became even more unsustainable. 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