EUR/USD posted sharp losses last week, falling close to 1.0%. There are 8 events on the schedule. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.
The ECB held the course on interest rates, with the main refinancing rate remaining at 0.0%. However, Mario Draghi dampened sentiment towards the euro, when he said that the ECB planned to ease policy at a later date. The manufacturing sector continues to contract in Germany and the eurozone, which recorded PMI readings of 43.1 and 46.4, respectively. The services PMIs in Germany and Europe were much stronger, indicating expansion. The German PMI came in at 55.4 and the Eurozone PMI was almost unchanged at 53.3.
In the U.S., durable goods orders rebounded in June. The headline reading gained 2.0%, crushing the estimate of 0.8%. Core durable goods orders jumped 1.2%, easily beating the estimate of 0.2%. The week wrapped up with Advance GDP for Q2, which dropped to 2.1%. Still, this beat the estimate of 1.8%. The markets are eyeing the Federal Reserve, with the CME Group pricing a rate cut at 78%. This would mark the first rate cut since 2008.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- Spanish Flash CPI: Monday, 7:00. CPI slipped to 0.4% in June, its lowest gain since September 2016. The June forecast stands at 0.6%.
- French Flash GDP: Tuesday, 5:30. The French economy has grown by a weak 0.3% in the past two quarters, and no change is expected in Q2.
- German GfK Consumer Climate: Tuesday, 6:00. The index has been weakening, pointed to a drop in consumer confidence in the eurozone’s largest economy. The index dropped to 9.8 in June, and is expected to fall to 9.7 in July.
- German Preliminary CPI: All Day. CPI has managed to crack above 0.5% only once in the past year, as inflation remains at low levels. The June release came in at 0.3%, and investors are keeping a close eye on July’s numbers.
- German Retail Sales: Wednesday, 6:00. The indicator has reeled off three straight declines, as the German consumer is holding tight to her purse strings. The markets are expecting better news in July, with an estimate of 0.2%.
- Spanish Flash GDP: Wednesday, 7:00. The fourth-largest economy in the eurozone grew by 0.7% in Q1, just above the estimate of 0.6%. The forecast remains at 0.6% for the Q2 release.
- Eurozone Inflation: Wednesday, 9:00. CPI Flash Estimate remained at 1.2% in June, matching the estimate. The forecast for July stands at 1.0%. The core reading improved to 1.1%, and the July estimate is 1.0%.
- Manufacturing PMIs: Thursday, 7:15 for Spain, 7:45 for Italy, final French figure at 7:50, final German one at 7:55, and final euro-zone number at 8:00. Spain and Italy both reported a contraction in manufacturing, with readings of 48.1 and 48.0, respectively. The French figure came in at 50.0, which separates contraction from expansion. The German PMI fell to 43.1, while the eurozone PMI dipped to 46.4.
EUR/USD Technical analysis
Technical lines from top to bottom:
1.1515 was a high point at the end of January. 1.1435 was a low point at the beginning of February.
1.1390 was a stepping stone on the way up in late January and capped EUR/USD earlier.
1.1345 is next. 1.1290 has some breathing room after EUR/USD sustained sharp losses last week.
Close by, 1.1270 was a double-bottom in December 2018.
1.1215 is the next resistance line.
1.1119 (mentioned last week) was tested in support for the first time since late May.
1.1025 was a cap back in May 2017.
1.0950 is next.
1.0829 is the final support line for now.
I remain bearish on EUR/USD
The U.S. dollar enjoyed broad gains last week and sent the euro to its lowest level since early May. With the eurozone grappling with weak growth and inflation, the euro will have a tough time holding its own against the strong U.S. dollar.
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