EUR/USD Outlook – September 27 October 1

Employment, inflation and many other releases will shape the direction of the strengthening Euro in the upcoming week. Here’s an outlook for the European events, and an updated technical analysis for EUR/USD.

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

The Euro enjoyed a superb week, rising gradually and eventually breaking a significant barrier. The debt issues were put aside. Will this optimism continue this week? Let’s start:

1. Jean-Claude Trichet talks: Monday at 7:00 and at 13:00. The president of the ECB will first speak in a conference in Frankfurt about regulation, and will later talk in front of a committee of the European parliament – a more important event. Any reference to the economic situation, debt issues and especially the interest rate will rock the Euro during a long time, as the second appearance will probably be quite long.
2. M3 Money Supply: Monday, 8:00. After a few months of squeeze in the amount of money in circulation, the Euro zone enjoyed a surprising growth two months ago, another sign that inflation isn’t as tame beforehand. After a 0.2% in the past two months, a 0.4% rise is expected now, and will boost the Euro.
3. German  GfK Consumer Climate: Tuesday, 6:00. After many months with a score under 4 points, this survey of 2000 German consumers jumped to 4.1 points last month, meaning that consumers are more confident to spend. A rise to 4.3 points is expected now.
4. German Prelim CPI: Tuesday. The different German states will release an initial estimation for the consumer price index. After a few months of rises, Europe’s largest economy is expected to show a dip of 0.2% in prices, probably a one time event. Any rise will boost the Euro.
5. French Consumer Spending: Tuesday, 6:45. Europe’s second largest economy didn’t release this important indicator last month, so we’ll have two releases now. The figure for July is expected to show a rise of 0.5%, while a drop is expected for August. If both figures offset each other, no significant effect will be seen.
6. German Unemployment Change: Thursday, 7:55. The locomotive of the Euro-zone enjoyed six straight months of drop in the number of unemployed people. A seventh month is expected to follow, with a drop of 20K, similar to last month’s 17K drop.
7. CPI Flash Estimate: Thursday, 9:00.  European prices have been on the rise and the zone is no longer in deflationary conditions, yet still lower than Britian – there’s no need for a rate hike. This time, the annualized number is expected to rise from 1.6% to 1.8% – something that can boost the Euro, raising the chance of a rate hike., which still seems far at the moment.
8. German Retail Sales: Friday, 6:00. The volume of sales has been quite volatile in recent months – with a jump of 3% followed by two months of drops. Last month’s 0.1% rise will probably be followed by a 0.5% rise this time.
9. Final Manufacturing PMI: Friday, 8:00. Purchasing managers became less optimistic, according to the initial release of this 600 strong survey. The score of 55.1 points will probably be confirmed now.
10. Unemployment Rate: Friday, 9:00. Employment is a weak spot in Europe and the release will probably be a reminder that the Euro-zone is still recovering slowly and unevenly. Since the beginning of the year, unemployment rate was at around 10%. It’s expected to remain at this level for another month, weakening the Euro.

The Euro began the week still struggling with the 1.3110 level. When the breakout came, the move was strong and the pair shot up. Later in the week, the range was between the 1.3267 and 1.3430 lines (all mentioned last week), with another breakout coming on Friday that sent the pair to an impressive close at 1.3487.

EUR/USD now ranges between 1.3430, which was a strong resistance line in February, and 1.3530 which was a line of support in the past, and now serves as minor resistance.

Looking down, the past week’s support line of 1.3267, which was also a support line in the past, provides the next significant support line. Below, 1.3110 worked recently as resistance and now serves as a line of support.

Lower, 1.2920 capped the pair twice during September and now is a strong support line now. 1.2730 worked in both directions in August and in September and is the last support line for now. There are more lines below, mentioned in previous weeks, but they’re too far now.

Looking up above 1.3530, the next line is 1.37. This area capped the pair back in February and March, and now also works as a significant resistance line. Higher, 1.3850 capped two attempts to break higher at the beginning of the year, and is another strong resistance line.

Even higher, the round number of 1.40 serves as the next minor line of resistance, after working in both directions in 2009. Higher, 1.42 was a support line in December.

I am bullish on EUR/USD.

The markets now focus on good European figures and disregards the debt issues. The Euro broke significant resistance levels and the influx of figures can push the Euro higher, at least during this week.

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

• James Chen sees more bullishness and marks the next levels.
• Andriy posts technical levels for the EUR/USD and other pairs on a weekly basis.
• Mohammed Isah discusses the resumption of the bullish momentum.
• Sophia Todorova, on Casey’s site,  sees bullishness in EUR/CAD as well.
• TheGeekKnows writes a review of the past week looks forward.

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/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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