EUR/USD closed for the sixth week on positive ground. The single currency managed to gain, in one and a half months, more than 3% in front of the US dollar.
Last week Euro touched a multilingual high at 1.3963 because of a high risk appetite that investors had. Right after this high was reached, on Thursday, the price began to drop. The fall was triggered by Draghi who said that euro exchange rate increasingly relevant in assessment of price stability. This, good US economic data and the problems in Ukraine turned investors to sell the European single currency and to buy safe heavens like gold and USDs.
The European CPI, German Zew and FOMC Statement would be some of the most important events scheduled for next week. Continue reading our article to find out what the expectations for these are and what other indicators are to be released, as well as what are our technical analysis on medium and short term for EURUSD.
CPI y/y (10:00). In February the consumer price index surprised with a 0.*% release. It was 0.1% more than the analysts’ median forecast. It is one of the most watched indicators by the ECB. Price stability is a key factor in the economic recovery for the Euro Area. In March it is expected to remain at 0.8%. If it will be published as a surprise than EURUSD will become volatile. A reading above expectations would trigger another rally for the Euro, while a reading below expectations would trigger shorting for the European single currency.
TIC Long Term Purchases (13:00). This indicator represents the difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners during the reported period. It is known to be a medium impact indicator. For this month it is expected to be released around 23.4.
US Industrial Production (13:15). From the beginning of 2014 the US industrial production was published under analyst’s estimates. In February it fell 0.3% and is now expected to recover only 0.2%.
German ZEW Economic Sentiment (10:00). This is one of the three most important leading indicators for the German economy. In February it was published at 55.7, but now the expectations are lowered to 52.8. Keeping in mind its importance, if it will be published under its forecast, I would expect to see a drop on the short term for the Euro.
EU ZEW Economic Sentiment (10:00). It is considered a medium impact indicator and it is rarely creating high volatility for the EURUSD. This month it is expected to be 67.3, a bit lower than the February reading.
US Building Permits (12:30). It is an important from the US real estate market. In January it was published in line with the expectations, in February it was 0.94 a bit lower than estimates and for March the expectations are of 0.97M.
US Core CPI m/n (12:30). The US core CPI has maintained its growing pace at 0.1% in the first two months of this year. For March it is expected to continue rising by 0.1%.
German 10-y Bond Auction. The last 4 bond auctions showed a falling yield for the German 10 year bonds. I will not be surprised to see another drop also in March. This is usually not something good for the capital markets. Yields drop because there is high demand for the bonds. When it is a high demand for them it means that there is some risk aversion among investors.
FOMC Economic Projections/ FOMC Statement and FOMC Press Conference (starting 18:00). These will bring for sure high volatility for the Forex market and especially for EURUSD. The markets are expecting news regarding the US economy and what Fed will do next with the Quantitative Easing Program.
German PPI m/m (07:00). The German producer price index dropped with 0.1% in each one of the last three months. For March analysts expect for it to gain 0.2%, but thinking at the Euro’s evolution I would say that we might see another negative release.
EU Economic Summit (DAY1). The European Union and the European Central Bank will have their first day of summit. Last week A. Merkel said that at this summit the Ukraine problem will be discussed more thoroughly.
US Unemployment Claims (12:30). This is the weekly indicator released for the US labor market. In March it surprised with better numbers than analysts forecasted. For Thursday it is expected to be 327K after last week was published 315K.
US Existing Home Sales (14:00). It is the annualized number of residential building that were sold during previous month, excluding new construction. For the last 5 months it was published only under estimates. For March it is expected to be 4.65M, but I would not be surprised to see a lower number released.
Philly Fed Manufacturing Index (14:00). The Philly Fed leading indicator for the manufacturing sector of Philadelphia it is pretty watched by investors. A surprise triggers high volatility for the pairs which contains the US dollar. Last month it dropped in negative ground. For next week it is expected to be 4.2.
EU Current Account (09:00). It is the difference in value between imported and exported goods, services, income flows and unilateral transfers during the previous month. It is a medium impact indicator. Analysts are expecting a drop to 18.4B from last month’s reading of 21.3B.
All hours are GMT.
Considering these week’s economic calendar I am expecting to see higher volatility than last week. Although there are only several important events like the European CPI and the FOMC meeting, the problems that still exists with Ukraine might just create the perfect environment for the market to react at each release.
Support: 1.3800, 1.3700;
EURUSD reached a high above 1.3950, but did not maintain that level for long. It dropped back under 1.3900 but investors managed to close the week at 1.3904. The main trend remains ascending. A local support it is set at 1.3850. If a daily close would be under it then we could expect a fall back under 1.3800. On the other hand a rally above 1.3950 could mean that investors are set to reach 1.40.
Support: 1.3822, 1.3800, 1.3764;
Resistance: 1.3915, 1.3964, 1.4000;
On a lower time frame we can see that the price is trying hard to break again 1.3915. A drop back under 1.3890 could signal a bigger fall that could reach 1.3800 or lower. On the other hand a break above the local highs could leave the door open for another rally that could target 1.4000.
Bullish Or Bearish
Even though Draghi came out and suggested that the Euro is pretty high, I don’t see any determination of the investors to start selling the European single currency. I am keeping my bullish expectations for the next week. Upside target would be 1.40. Don’t forget about 1.3850, a daily close under this level could mean a correction is starting.