The Euro has just past through a ruff week, after it hit a new low for this year, managed to recover and close the week with some modest gain. The single currency tried to keep itself higher in the beginning of the week after the good German economic data, but was hit pretty hard by Mario Draghi, at the press conference, right after the ECB announced that it will keep the interest rate unchanged at 0.25%.
The European Central Bank’s president said that the bank will keep a close look over the money markets to prevent other damage to the Euro and that it will fight the falling inflation, but said nothing about the means of actions. All this triggered a fall for the EURUSD to a new low for the week, and year, under 1.3550.
On the last day of the week, the balance changed once more. The weak Non-Farm Payrolls (74K vs. 196K exp.) weakened the dollar, even though the Unemployment Rate fell 0.3% to 6.7%. The overall data showed that the unemployment rate dropped even though there were not that many jobs added, resulting that the population participation was poor in calculating the rate.
Latest EURUSD Post on Fundamental: Our Outlook for the First Non-Farm Payrolls in 2014
Let us see what are the main events and publications from the Euro Area that could have an impact over this currency pair:
Euro Zone Industrial Production – Tuesday (10:00 GMT). In December it fell 1.1% from another 0.2% drop in November, even though it was expected a raise of 0.4%. Last week German Industrial Production rose 1.9% after a 1.2% drop and the French Industrial Production rose 1.3%. If Monday’s Italian Industrial Production will be published at least in line with the expectations of a 0.6% rise, then the probability for the Euro Area I. Production to gain 1.6 percent or more would be quite high, and the Euro could gain on the short run.
Euro Zone Trade Balance – Wednesday (10:00 GMT). The Euro Area Trade Balance had a pretty interesting evolution. In October met the analysts expectations, as well as in November when it got to 14.3B. In December was lower than estimates, but still rose to 14.5. This month it is expected to be released 16.7B. Even though it is not a high impact indicator, a big difference of the next publication from the expected number could trigger some volatility for the Euro.
ECB Monthly Bulletin – Thursday (09:00 GMT). In December’s Bulleting the ECB stated that it will closely keep an eye on the money markets so that the rates will not affect the Euro Area Economy. They will continue to provide liquidity and maintain their forward guidance. Mario Draghi enhaced these points after the Minimum Bid Release, at the press conference. This month’s Bulletin is expected to state the position of the ECB regarding current inflation and the lack of it.
Euro Area CPI/Core CPI – Thursday (10:00 GMT). The inflation rate of the Euro Area it is a key factor for the economic recovery. The ECB is closely following the evolution of the price stability and their main interest is to bring it close to their target. This month’s CPI is expected to be 0.8%, while the Core CPI to raise to 0.9% on y/y basis.
German Constitutional Court Ruling – Friday. The German Federal Constitutional Court is due to announce a ruling regarding the constitutionality of the ECB’s Outright Monetary Transactions policy (OMT), in Karlsruhe.
Even though we posted some important factors from the Euro Area, that could move the EURUSD currency pair, it is necessarily to look also over the USA’s economic releases. Because as we saw last week these can also have a big, or even bigger, impact on the price evolution of the pair.
Next week are programmed to be released for US economy:
Monday: Federal Budget Balance – expected to raise with 44.3B;
Tuesday: Core Retail Sales – Exp. 0.4% with a previous growth of 0.4% (Retail Sales Exp. +0.2%); Import Prices – Exp. +0.3% ; Business Inventories – Exp. 0.4%; FOMC members Fisher and Plosser are expected to talk.
Wednesday: PPI m/m – Exp. +0.5% (Core PPI m/m – Exp. +0.1%); Beige Book;
Thursday: CPI m/m – Exp. +0.3% (Core CPI m/m – Exp. +0.1%); Unemployment Claims – Exp. 327K (lower than the previous week’s 330K); TIC Long-Term Purchases – Exp. 42.3B (from 35.4B last month); Philly Fed Manufacturing Index – Exp. 8.8 (from 7.0 in December);
Friday: Building Permits – Exp. 1.01M; Industrial Production – Exp. 0.4% (from 1.1% in December); Prelim UoM Consumer Sentiment – Exp. 83.4 (up from 82.5 last month).
As you can see there are some important publications scheduled next week for the United States, if the numbers will surprise in one way or another EURUSD could get to know an increase in the volatility and fast directional changes
Chart: EURUSD – Daily
Daily Support: 1.3400, 1.2700;
Daily Resistance: 1.3800, 1.4000;
On the daily chart the EURUSD continued to draw higher highs and higher lows inside the up channel. This is a clear signal that the uptrend is still in place, at least as long as no lower lows will be touched. On medium term the price has moved in a range limited by the 1.3800 resistance area and the 1.3400 support area.
Chart: EURUSD – H1
H1 Support: 1.3653, 1.3610, 1.3560;
H1 Resistance: 1.3675, 1.3730, 1.3800;
On the H1 (60 min.) chart we can observe that the last week’s price action hit several times the 1.3560 support but is couldn’t get through. On the upper side the price couldn’t break 1.3674 not even after the NFP publication which has disappointed. The two big rising candles from Friday could signal that bulls are in power and might get the price higher.
If we stick to the technicals I would say that a break through the Key H1 Resistance (1.3675) could trigger a rally to the next important level, 1.3730. On the other hand a drop under the Local Support (1.3653) can open the door for another drop of the Euro to 1.3610 support.
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Bullish or Bearish?
In my opinion EURUSD has a good probability to continue the sideways move noted on the daily chart, between 1.3400 and 1.3800 with no big surprises for the week ahead. In what concerns the lower time frame I believe that for the moment bulls are in power. Some good economic data from the Euro Area combined with some in line or under expectations readings from the USA could be the motive for buying the single currency at least in the first part of the week.