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After a crazy week that saw the Euro lose some ground, another busy week awaits us, with inflation and employment figures being the highlights. Here’s an outlook for the European events and an updated technical analysis for EUR/USD.

The collapse of the government in Portugal, the credit downgrades and the soaring yields, all pave the bailout. News from Portugal will continue influencing Euro/Dollar, and there are quite a few indicators. Let’s start.

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

EUR USD Chart March 28 April 1

  1. Jean-Claude Trichet talks: Monday, 15:00. The president of the ECB will have another chance to clarify that a rate hike is coming, boosting the Euro, as he speaks in a conference in Paris.
  2. German CPI: Tuesday. The various German states will publish their initial estimations for price changes in March. Expectations are for the same price rise recorded last month – 0.5%. A rise closer to 1% will boost the Euro.
  3. GfK German Consumer Climate: Tuesday, 6:00. 2000 consumers are surveyed by GfK for this influential indicator that was delayed from last week. After quite a few surprises in recent months, the score is now expected to dip from 6 to 5.9 points.
  4. French Consumer Spending: Tuesday, 6:45. Europe’s second largest economy saw its consumers squeeze their expenses last month by 0.5%, disappointing the euro. A rise of 0.7% is predicted now, and this will serve as a correction.
  5. German Retail Sales: Wednesday, 6:00. This important consumer indicator tends to be volatile, and undergo significant revisions. Nevertheless, it is still of importance. A modest rise of 0.4% is likely now, exactly like last month.
  6. German Unemployment Change: Thursday, 7:55. Europe’s powerhouse is enjoying nice falls in the number of unemployed people in recent months, with an exceptionally impressing drop last month – 52K. A more modest drop of 22K is due now, also positive for the euro.
  7. CPI Flash Estimate: Thursday, 9:00. After the annual pace of inflation already crossed the ECB’s target of 2% three months ago and reached 2.4% later on, it’s now expected to ease to 2.3%, at the initial read. It seems that only a drop to 2% or less can prevent the rate hike.
  8. Final Manufacturing PMI: Friday, 8:00. The Euro-zone’s manufacturing sector is growing very nicely. The first, flash score, was at 57.7 points. This will probably be confirmed now.
  9. Unemployment Rate: Friday, 9:00. While Germany enjoys low unemployment, other countries, especially in the periphery, are struggling. The unemployment rate for the whole Euro-zone dropped to 9.9%, just under the psychological round number of 10%, but this is still very high and weighs on the euro. It’s predicted to remain unchanged now.

EUR/USD Technical Analysis

A failed attempt to reach the peak of 1.4282 (discussed last week), sent Euro/Dollar down to bounce above the strong 1.4030 line. It eventually closed at 1.4085, about 100 pips lower than last week’s close.

Looking up, initial yet weak resistance appears at 1.4160. This was a peak quite some time ago and recently worked as pivotal line separating the lower and higher ranges of trade. Much more important resistance is at  1.4282 – this is the peak that EUR/USD touched just after QE2 was announced in November. The highest level in a year couldn’t be reached.

Further above, we already encounter rather veteran lines of resistance. 1.4450 served as resistance at the beginning of 2010. It’s followed by 1.4580 which was a peak at the same period of time and worked as support earlier.

Even higher, the round number of 1.48 was a tough line of support at the end of 2009. Even higher, above the round number of 1.50, we find 1.5144, the highest level since the financial crisis began.

Looking down, initial and very strong support is close, at  1.4030 This line, that was a peak in September was a distinctive support line, and after the convincing break higher, it wasn’t even challenged.  It’s followed by 1.3950, that worked as minor support in the past weeks and also worked as a pivotal line around November.

Further below the pair will meet 1.3860, which cushioned falls recently and was also a peak earlier in the year.  Even lower 1.3760 is another significant line, that held the pair earlier this month and in the past as well.

Just below it, we find 1.37, a round number that also works as minor support.  1.3570 is the next line below, that prevented quite a few falls. The last line for now is 1.3440, which worked as support for the third time in the past year, and is the lowest level in two months.

I am bearish on EUR/USD.

A bailout for Portugal is here, as the government failed to pass the budget and collapsed. With yields of over 8%, there’s only a bit of denial left before it happens. And on the other side of the Atlantic, we now discover that also the Federal Reserve can be hawkish, matching the “strong vigilance” of Jean-Claude Trichet.

Here are some extra recommended reads about Euro/Dollar:

  • Gregor Horvat uses Elliott Wave analysis and sees that EUR/USD is rising in an impulsive formation.
  • 5 Arguments for the Dollar, and 5 Against It – How forces moving the dollar are likely to affect EUR/USD.
  • James Chen provides an excellent technical analysis for EUR/USD.
  • Kathy Lien looks at interest rate expectations and sees big hopes for the ECB.
  • Adam Kritzer sees the Euro tied with the pound at the moment.
  • Andriy Miraru provides weekly support and resistance lines for major pairs, including EUR/USD.
  • TheGeekKnows writes a review of the past week looks forward.

Further reading on Forex Crunch: