Euro/dollar fell around 170 pips to lower ground within the narrowing channel in a turbulent week. Elections in Greece and France over the weekend will set the tone for the whole week, which also features other events. Will the pair stay in the range? Or will events force a breakout? Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD. The recession is in the euro-zone seems quite deep according to recent PMI figures. Even Germany saw a rise in unemployment. Nevertheless, Mario Draghi is still optimistic and sees the economies recovering in the second half of 2012. Is the bottom really close? Or can we expect another round in the crisis very soon? In the US, NFP showed a gain of 115K, weaker than expected. Yet the drop in the unemployment rate to 8.1% and the upwards revisions of the previous month certainly improve the picture. Updates: Election results in France and Germany dominated the headlines and news on Monday. In France, voters handed Socialist leader Francois Hollande a dramatic victory, and sent President Sarkovy packing. Greek voters vent their anger by throwing out the ruling government, but there was no clear winner, as a period of political instability seems likely. The elections will likely set the tone for EUR/USD movement this week. The euro continued to slump, hitting a three-month low in overnight trading, as it dropped below the 1.30 level. The currency has rebounded slightly, as EUR/USD was trading at 1.3034. Investor Confidence did nothing to help the sour mood of the markets, hitting a five-month low. The index posted a reading of -24.5 points, well below the market estimate of -15.4. There was some good news to start the week, as German Factory Orders jumped 2.2%, its best level since December 2011. After a rocky start to the week, the euro has steadied, but the markets are anything but calm following the election results in France and Greece. EUR/USD was trading at 1.3024. In Germany, the ruling coalition suffered a defeat in regional elections, raising concerns about the stability of the German government. German Industrial Production easily beat the market forecast, posting a strong reading of 2.8%. ECB President Draghi is scheduled to deliver a speech this afternoon, and the markets will be very interested in his take on the elections in France and Greece and the slumping Euro. With coalition talks continuing in Greece, there is growing concern that the country will not be able to honor the terms of the bailout package. Germany and the EU are becoming increasingly frustrated with events in Greece, but there is little that they can do besides plead with Greece to honor its commitments. The slumping euro dropped below the 1.30 level, amid concerns that Greece may not honor the bailout agreement. EUR/USD was trading at 1.2974. There was some good news as both the German and French Trade Balance readings beat the market estimates. The German reading posted a figure of 13.7B, exceeding the market forecast of 13.4B. The French trade deficit improved, with a reading of -5.7B. This was a notch better than the market predicition of -5.8B. French Industrial Production was a disappointment, falling sharply to -0.9%. The market forecast stood at -0.4%. The news was better out of Italy, where Industrial Production beat the market estimate of 0.0%, recording a reading of 0.5%. The French Gov Budget Balance came in at -29.4B. The ECB Monthly Bulletin was released on Thursday. The drama in Greece continues, with no sign of any exit from the current political deadlock. EUR/USD has edged upwards, trading at 1.2955. The markets will be closely watching US Unemployment Claims, which will be released later on Thursday. EUR/USD daily chart with support and resistance lines on it. Click to enlarge: Greek elections: Sunday, exit polls expected in the evening before markets open, final results late after market opens. The mainstream, pro-bailout, pro-austerity parties are expected to weaken and lose the absolute majority, leading to negotiations for a shaky right wing government that will try to renegotiate the bailout conditions. This is the scenario with the highest probability. See the 3 scenarios for the Greek elections and the euro. In any case, the coalition negotiations will take quite some time and this will likely cause volatility. French elections: Sunday, exit polls expected in the evening, clear results expected as markets open. Opposition socialist candidate FranÃ§ios Hollande is expected to win incumbent president Nicolas Sarkozy with a small margin. A victory for Hollande will change the current austerity policy in Europe and will hurt the euro in the short term. In the long run, Germany will have to adapt itself to the new atmosphere. A surprise victory for Sarkozy will boost the euro in the short term. Local German elections: Sunday. Angela Merkel’s CDU party is expected to lose ground in the small northern state of Schleswig-Holstein. This is also a test for her junior coalition partner, FDP, which might be not be represented in the next German parliament. While this state is small, the results will likely impact the next local elections, scheduled for the next weekend in Germany’s largest state: Nordrhein Westfalen. Chancellor Merkel sometimes adopts opinions of her opponents in order to corner them. This could also happen with the European austerity policy if she sees that the wind blows in a different direction. Sentix Investor Confidence: Monday, 8:30. This survey of 2800 analysts and investors tends to have a significant impact on the euro. After 3 months of improvement, the indicator dropped once again, from -8.2 to -14.7. The negative score means pessimism. A similar score of -14.3 points is predicted now. German Factory Orders: Monday, 10:00. The volume of factory orders disappointed with a small rise of only 0.3% in Europe’s No. 1 economy. A rise of 0.5% is expected now. This indicator used to be more volatile earlier in the year. German Industrial Production: Tuesday, 10:00. Also industrial output disappointed in Germany last month, with a deep fall fall of 1.3%. A bounce is predicted now, with a rise of 0.8%. Note that Germany’s manufacturing PMI also reflects weakness in this sector. German Trade Balance: Wednesday, 6:00. Even if the industry isn’t at its best, exports remain high, and this keeps the German trade surplus high: a surplus of 13.4 billion is expected now, after a similar surplus of 13.6 last time. French Trade Balance: Wednesday, 6:45. In France, the situation is different, and the trade deficit was also a hot issue in the debate between Sarkozy and Hollande. The deficit is expected to squeeze from 6.4 billion to 5.9 billion. French Industrial Production: Thursday, 6:45. Industrial output in Europe’s No. 2 economy has changed too much in the past two months. After a rise of 0.3% last time, a drop of the same scale is on the cards now. ECB Monthly Bulletin: Thursday, 8:00. One week after the rate decision, the European Central Bank releases the data it used to make its decision. This might give a clue to why the baseline scenario of the bank is of a recovery in H2 2012. The report usually has a significant impact. German Final CPI: Friday, 6:00. The ECB has a “single needle in its compass” – inflation and it is criticized for being leaning too much to German inflation. Inflation has eased according to the initial release, and a marginal rise of 0.1% was reported. This will likely be confirmed now. * All times are GMT EUR/USD Technical Analysis â‚¬/$ challenged downtrend resistance early in the week, but after losing 1.3212 (mentioned last week), a sharper drop was seen. The pair eventually got close to the bottom of the narrowing channel (uptrend support) before closing down at 1.3082. Technical lines from top to bottom: 1.3615 is a high line which worked in both directions in the fall of 2011. Hints about QE3 could send the pair there, but this is highly unlikely. 1.3550 capped the pair in November and December and marked the beginning of the plunge. 1.3486 was a distinctive double top in February 2012 and is a strong cap. It’s closely followed by minor resistance at 1.3437. The pair struggled there when it traded higher. The round number of 1.34 is now the top border of the wide range. It capped the pair in the most recent surges. The next line below is round as well:, 1.33 was tough resistance 4-5 times, with two attempts very recently. It remains key resistance. 1.3212 held the pair from falling and switched to resistance later on. It proved itself as resistance once again in April 2012. This was the bottom border of tight range trading in February. It is now pivotal as a support line. 1.3180 now replaces the 1.3165 line after capping attempts to rise in May 2012. It is a pivotal line now. 1.3110 is another minor line that capped the pair in January and later in April 2012 as a stepping stone for a move higher. 1.3050 worked as support in April 2012 and also in March, and is the last frontier before 1.30. The round number of 1.30 is psychologically important and proved to be a place of struggle. The failure to breach it in April 2012 showed its strength once again. The 1.2945 line is stronger once again and still provides support. 1.2873 is the previous 2011 low set in January, and it returns to support once again. This is a very strong line separating ranges. 1.2760 is a pivotal line in the middle of arange. It provided support early in the year. 1.2660 was a double bottom during January and the move below this line was not confirmed. 1.2623 is the current 2012 low, but only has a minor role now. Narrowing Channel As you can see in the chart above, the trading range of the pair is narrowing down. Both lines began in February, with uptrend support being more significant than downtrend resistance. A breach below this line was very temporary in its nature, and an attempt to break above downtrend resistance failed, making the line even stronger now. In addition, here is a recent Elliott Wave Analysis of the pair, which points to low ground. I remain bearish on EUR/USD Unless we see Sarkozy win and a convincing majority for pro-bailout parties in Greece, the euro will likely suffer from the results, which aren’t fully priced in. They join the serious recession in Europe. In the US, the economy isn’t shining, to say the least, but jobs are still being created and growth is consistent. 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 USD/CAD Outlook May 7-11 Anat Dror 10 years Euro/dollar fell around 170 pips to lower ground within the narrowing channel in a turbulent week. Elections in Greece and France over the weekend will set the tone for the whole week, which also features other events. Will the pair stay in the range? Or will events force a breakout? Here is an outlook for the upcoming events and an updated technical analysis for EUR/USD. The recession is in the euro-zone seems quite deep according to recent PMI figures. Even Germany saw a rise in unemployment. 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