A pretty hard week has just passed for the Euro fans. The European single currency has got to a loss of 1.35% in front of the US dollar at the closing hour on Friday. During the firs two days EURUSD remained near the opening price. The Euro was helped by a pretty good German IFO Business Climate. It started losing after the FOMC statement which announced another 10B cut in the Quantitative Easing Program. The US dollar started gaining ground.
In the second part of the week the good German Unemployment Change and the Euro Unemployment rate could have helped the single currency if it wasn’t for the Euro Area CPI which came under analysts estimations at 0.7%. The dollar got investors support only because of the FOMC Statement. The economic data published for the USA was mostly under expectations. Continue reading our article to see what should you expect next week.
Manufacturing PMIs – Monday. The Spanish PMI scheduled at 08:15 (GMT) surprised the market in January with a 50.8 reading. This month it is expected keep itself above 50 and rise all the way to 51.3. The Italian PMI scheduled at 08:45 (GMT) has passed the first time above the 50 level in August last year and continued to rise all the way to 53.3 in January this year. For Monday it is expected to be 54.2. The Euro Area Manufacturing PMI it expected at 9:00 (GMT) and it is expected by the analysts to be around 53.9.
Spanish Unemployment Claims – Tuesday 08:00 (GMT). Spain has the second highest unemployment rate in the Euro Area but the last two jobless claim reports have been more than expected. In January the claims have dropped with 107.6K and next week the markets expects another 21.3K drop.
Services PMIs – Wedneday. Spanish Services PMI is scheduled at 08:15 (GMT) and expected 55.3. The last three publications have been surprisingly good. The Italian Services PMI is awaited at 08:45 (GMT) and expected 48.2. In December and January fell under 50 and disappointed the market. The Euro Area Final Services PMI is scheduled at 09:00 (GMT) and it is expected 51.9. In September last year this indicator managed to get above the 50 level signaling optimism among top managers.
Euro Area Retail Sales – Wednesday 10:00 (GMT). In November sales dropped with 0.6% while expectations were of a 0.3% drop. The fall continued in December, but in January surprised with a 1.4%. For next week it is expected to drop with 0.7%.
German Factory Orders – Thursday 11:00 (GMT). In January the German Factory Orders rose with 2.1% after a month before registered a drop of 2.2%. For Thursday it is expected to add 0.3%.
Euro Zone Rate Decission – Thursday 12:45 (GMT). The ECB is expected to maintain the minimum bid rate for the Euro Area at 0.25%. At the press conference which could be the highlight of the week, scheduled at 13:30 (GMT) they might say that no change will be done for the moment to the monetary policy. But as the German and Euro Area CPIs are falling, Mario Draghi, the Central Bank’s president, might say something about negative rates. This couls send the Euro even lower, but after all this is expected to help inflation and the European economy.
German Industrial Production – Friday 11:000 (GMT). The week will end with a last German economic indicator, the industrial production. It had a fell of 1.2% in December, but it was corrected by the 1.9% gain from January. On Friday it is expected to add about 0.5%.
These are the most important releases scheduled for next week for the Euro Area, but to be better prepared take a look on the US economic releases.
Monday: ISM Manufacturing PMI – Exp.53.8;
Tuesday: Factory Orders – Exp. -1.1%;
Wednesday: ADP Non-Farm Employment Change – Exp. 191K; ISM Non Manufacturing PMI – Exp. 53.8; FOMC Member Plosser Speaks;
Thursday: Trade Balance – Exp. -35.8B; Unemployment Claims – Exp. 334K;
Friday: Non-Farm Employment Change – Exp. 185k; Unemployment Rate – Exp.6.7%.
As you can see it will be a full week. With very important releases for both Euro Area and United States. The expectations are mostly pressuring the Euro. At its current rate it might not be of use for an economic recovery for Europe so the ECB might force a negative rate. On the other hand the eyes will also be on the Non-Farm Payrolls and the Unemployment Rate.
Last week I said that I was expecting a retest on the upper line of the Falling Wedge. The USD did gain, but much more than anticipated. The 1.35% send the EURUSD at a new low. At this point the price hit an important zone around 1.3500. Here we can see the trend line of the up channel and the rejection line for the latest down channel. I don’t think that it is enough to maintain the price. The next important support level sits at 1.3400. We have ahead an important week that could be very interesting.
Support: 1.3487, 1.3450, 1.3400;
Resistance: 1.3506; 1.3586, 1.3639;
On the lower time frame the price has respected our scenario and every drawn level. The trend is clearly down, but on the short time I would be very attentive at a pullback. The 24 RSI has been in the oversold area and might signal a bullish move. A break above the local resistance, 1.3506, could confirm the up move. On the other side if the price will drop under the current low, I would be very attentive at a possible divergence drawn on the RSI.
Bullish or Bearish
This week again I can say that I am bullish on the US dollar on the medium term. Both fundamental and technical analysis shows that the price is set to go lower for the EURUSD. In the first part of the week I believe that could be room for a short rally, as a corrective move for the current down trend. After the ECB monetary policy and press conference the Euro might continue to lose ground so short positions are favored.