It has been a bumpy week for the Euro with the US dollar currency pair. It started by dropping to a new low in the first trading day and maintained a low price during the first part of the week after the German ZEW disappointed, but had a fast comeback after the flash manufacturing and services PMIs got published. All the released PMIs were above analyst forecast surprising the market and building momentum for the Euro buyers.
Though it was a very good week for the European single currency it might not be enough to turn the odds its favor. We have an important week ahead with important economic releases for the United States and not to forget about the FOMC statement which could trigger another rally for the American dollar. Continue reading our article to see what the main events of the week are and have an update on the technical view.
German IFO Business Climate – Monday (09:00 GMT). This indicator surprised the market in November with a reading of 109.3, above any expectations, while on December was almost in line with the 109.7 forecast. For this week it is expected ti be published around 110.2, a big difference between the actual value and the expected one could trigger high volatility.
Eurogroup Meeting – Monday. These meetings are attended by Eurogroup President, Finance Ministers from the Euro Area member states, the Commissioner for the economic and monetary affairs and the ECB president. They usually held in Brussels. The decisions taken here most of the times have an important impact upon Eurozone’s economic health.
Weidemann speaks – Monday (18:00 GMT). Jens Weidemann is the current President for Deutsche Bundesbank. He will speak in Germany and have in his agenda ticked a the inflation problem from the Euro Area.
GfK German Consumer Climate – Wednesday (07:00 GMT). This is the level of a composite index based on surveyed consumers. It has exceeded its forecast in November and December. For this month it is expected to be above last month’s reading, around 7.8.
German 10-y Bond Auction – Wednesday. This is offered by Bundesbank and it is the average yield of the 10 years government bonds sold at auction. From September last year the yield has dropped from 2.06 all the way to 1.69.
German Prelim CPI – Thursday. From the economic releases calendar it is pretty obvious that Germany doesn’t confront itself with the deflation danger. The Consumer Price Index has exceeded its estimations for November and December. For January it is expected to drop with 0.4%. A positive surprise could send the Euro higher on the release trading day.
Spanish GDP – Thursday (08:00 GMT). This is a quarterly release. The last two publications were in line with the estimates -0.1% respectively 0.1%. This month Spain’s GDP is expected to gain 0.3%.
German Unemployment Change – Thursday (08:55 GMT). This macro indicator it is pretty volatile and has a low to medium impact on the market. For this month it is expected at -5K.
German Retail Sales – Friday (07:00 GMT). This is the last economic indicator that will be published for Germany next week. For December the surprise brought by this economic data was quite big. Expected to gain 0.5%, it was published 1.5%. For this week the forecast are of +0.2%.
CPI Flash Estimates – Friday (10:00 GMT). The ECB has its eyes over the price stability for the Euro Area. In this period the CPIs are pretty important for investors. The year on year change it is expected to get up with 0.9%, a value which is way below the 2% target of the Central Bank. A lower value of this release could mean an important drop for the Euro.
Unemployment Rate – Friday (10:00 GMT). The Euro Area Unemployment Rate has maintained itself around 12.1% during the past 6 months. The same number is expected to be released by Eurostat next week.
As you can see, there will be a lot of German economic indicators published next week. Even though it will be a bigger number of releases, their importance is quite low. Most of the indicators mentioned have medium impact on the EUR/USD currency pair on the very short term. As we told you before while trying to understand the possible evolution of the pair a trader should also take a look over the economic releases from the United States.
Monday – New Home Sales: Exp. 457K;
Tuesday – Core Durable Goods Orders: Exp. 0.7%; S&P/CS Composite: Exp. 13.7%; CB Consumer Confidence: Exp. 78.1;
Wednesday – FOMC Statement; Federal Funds Rate: Exp. <0.25%;
Thursday – Advance GDP q/q: Exp. 3.2%; Unemployment Claims: Exp. 331K; Pending Home Sales: Exp. -0.1%;
Friday – Core PCE Price Index: Exp. 0.1%; Chicago PMI: Exp. 59.0; Revised UoM Consumer Sentiment: Exp. 81.0.
As you can see the scheduled publishing for the United States are important and with a high impact on the market. It is vital to not forget the FOMC statement which could be accompanied by very high volatility before and after the release. Investors are still waiting for modifications in the Quantitative Easing program.
The price of EUR/USD rallied after it touched a new low, broke the upper line of the Rising Wedge and ended the week with a Daily Shooting Star. Even if the last signal was bearish, I believe that there is a chance for the Euro to get back around 1.3800, after a retest on the broken line. On the medium term I still believe that bears are stronger and could maintain the price in this 400 pips range.
Support: 1.3665, 1.3693, 1.3581, 1.3506;
Resistance: 1.3698, 1.3730, 1.3800;
On the 60 minutes interval this currency pair has respected, during last week, each and every support and resistance that we proposed. After a consolidation around 1.3550 the price rallied all the way to hit a high above 1.3700, but couldn’t maintain the level. Bears pushed the price back, but found a local support at 1.3665. A drop, under this latest level mentioned, could mean a retest on the 1.3640. A close above 1.3730 resistance would mean that the door is open for a rally to 1.3800.
Bullish or Bearish
On the medium term I still believe that the US dollar could get stronger. The intraday view has changed during last week because of the latest price action. Even though I would be tempted to say that I would go long on the Euro for this week, I believe it would be safer to wait for the FOMC statement which could enforce my belief or change the balance again in favor of the dollar. Keep your stops tight until this event.