EUR/USD Outlook – June 14-18

The important ZEW survey and inflation figures will draw attention in this week’s Euro trading. Here’s an outlook for the events that will move the Euro, and an updated technical analysis for EUR/USD. Will the recovery continue? Or was it a temporary pause on the way down?

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

The European debt issues haven’t been resolved, but there’s less turmoil in the markets. The austerity measures will probably trigger a double dip recession, but the markets are already getting used to this idea. Let’s start:

1. Industrial Production: Published on Monday at 9:00 GMT. Industrial output surprised in the past three months, growing at a stronger scale than expected. After rising by 1.3% last time, only half the growth is predicted now – 0.7%. Note that Germany and France, who publish their figures earlier, pull the zone forward.
2. German ZEW Economic Sentiment: Published on Tuesday at 9:00 GMT. This very important survey of 350 investors and analysts has a strong impact on the Euro. Last month’s number reflected the economic turmoil in Europe, as the result fell more than expected – to 45.8 points. A small recovery to 48.7 points is expected now, showing  the relative stability seen in past few weeks. The all-European figure fell to 37.6 points, also stronger than predicted, and it’s now expected to rise back to 41.2 points. The German number has a bigger impact.
3. CPI: Published on Wednesday at 9:00 GMT. European inflation is rising, and is currently under control. CPI is expected to show an annual rise of 1.6%, and Core CPI at 0.8%. Jean-Claude Trichet doesn’t have to worry about rate hikes at the moment. A bigger jump in prices will cause a serious headache.
4. ECB Monthly Bulletin: Published on Thursday at 8:30 GMT. This bundle of economic data is what the ECB saw before its eyes before making the recent rate decision. It can reveal interesting data that can move the Euro.
5. Axel Weber talks: Starts speaking on Thursday at 12:00 GMT. The leading candidate to replace Jean-Claude Trichet will talk in a conference in Frankfurt. This influential member of the ECB might speak his mind about the current state of the European debt problems, and usually shakes the currency.
6. German PPI: Published on Friday at 6:00 GMT. In the past two months, producer prices have risen at a higher-than-expected rate in the Euro-zone’s largest economy. After the 0.8% rise last time, prices are predicted to rise by only 0.2%. A third straight months of rises will cause worries.

The beginning of the week was awful for the Euro, as it made a dive to new multi-year lows and bottomed out at 1.1876. From there it bounced back up and managed to settle above 1.20.

The previous 1.2142 support line, mentioned in previous outlooks is now a resistance line at 1.2150. This currently caps the Euro’s recovery. Above 1.2150, the next line of resistance is at 1.2330, the “Lehman levels” seen at the height of the financial crisis in October 2008.

Above, 1.2460 was a high point and now works as the next resistance line. It’s followed by 1.2670 which was a swing high. There are more lines of resistance higher, but the Euro will probably not approach them soon.

Looking down, 1.20 returned to its role as a line of support, being a round number that many politicians look at. Below, the new record low of 1.1876 provides further support.

Even lower, 1.17 is a symbolic value – the Euro launched at this level in 1999, and it’s followed by the 2005 low of 1.1630. A drop below this line will send the pair to levels last seen in 2003.

I remain bearish on the Euro.

The recovery of the Euro wasn’t backed by substantial data. Many “Club Med” countries suffer from debt issues, and the stronger countries cannot prevent another recession. The disease is contagious.

This pair receives lots of great reviews on the web. Here are my picks:

• Casey Stubbs shows us his trading log for EUR/USD and learns a few lessons.
• Kathy Lien,  in a TV interview, doesn’t think that the Euro is undervalued.
• James Chen provides an interesting monthly outlook for EUR/USD.
• TheGeekKnows reviews the week and looks forward.

Further reading on Forex Crunch:

• For a broad view of all the week’s major events worldwide, read the  forex weekly outlook.
• For the British Pound (sterling), read the  GBP/USD forecast.
• For the Australian dollar (Aussie), check out the  AUD/USD forecast.
• For the New Zealand dollar (kiwi), read the  NZD/USD forecast.
• For USD/CAD (loonie), check out the  Canadian dollar forecast.

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