EUR/USD had a turbulent week that it eventually ended slightly lower and it is still looking for a new direction. The upcoming week features a speech by Draghi, final inflation figures, and more. What’s next for EUR/USD? Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
While Germany will finally have a government, Italy’s elections ended with an inconclusive outcome that initially weighed on the euro. The ECB decided to remove its open door to increasing the size of its QE programming, initially sending the euro higher, but Draghi then downplayed the change by saying there was no change to the outlook and that the change only confirms the previous assessments. Falls in industrial output, that joined weaker PMIs caused speculation that the euro-zone economic growth has peaked. The US gained 313K jobs but wages slowed down to 2.6%, below expectations and pushing the greenback lower. The breakthrough in talks with North Korea weakened the dollar and the yen while Trump’s tariffs initially hurt the greenback but when they were watered down, they allowed for a recovery. All in all, a very busy week with many moving parts.
EUR/USD daily graph with support and resistance lines on it. Click to enlarge:
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar started off the week with a drop towards the 1.2260 level mentioned last week. It then recovered nicely hitting a high of 1.2447 before falling back to the middle of the range.
Technical lines from top to bottom:
1.2650 is where the long-term downwards resistance level dating from 2008 meets this month’s levels. Further below, the recent swing high of 1.2555 may serve as resistance.
1.2450 was a swing high in March 2018. 1.2360 provided support to the pair in early February and now switches to resistance.
1.2260 was a support line in mid-February. 1.22 is a round number and also a level of comfort in February. 1.2155 was the low point in early March.
The 2017 peak of 1.2090 remains essential. 1.20 is the obvious round level and also worked as resistance in September.
1.1950 was the high level seen in November and a stepping stone towards 1.20. 1.1860 capped the pair in August and in October while working as support in September.
I turn from bullish to neutral on EUR/USD
While the ECB is nearing the exits, a new worry emerges: euro-zone growth may have reached a peak and this takes the sting out of the common currency. In the US, the setback in wages balances things out. All in all, this is beginning to turn into an “ugly contest”.
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