EUR/USD had a mixed week, sticking to known ranges. The upcoming week features fresh inflation figures, GDP updates, and some PMIs. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Troubles in German coalition talks sent the euro briefly lower, but it recovered quite quickly. Hopes for a grand coalition and upbeat PMIs already sent EUR/USD to challenging the double top. The meeting minutes by the ECB did not tell us something we did not know. In the US, the meeting minutes actually revealed a growing concern about low inflation. Three hikes in 2018 does not seem so likely.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
Monetary data: Tuesday, 9:00. M3 Money Supply, which reflects money in circulation, grew at an annual pace of 5.1% in September, similar to previous levels. Growth in private loans stood at 2.7% y/y. These are healthy gains, partly a result of the ECB’s monetary stimulus.
German GfK Consumer Climate: Tuesday, 12:00. The 2000-strong survey has been dropping off the highs in the past two months, standing at 10.7 in October. The peak was 10.9 in August.
French Consumer Spending: Wednesday, 7:45. French consumers were active in September, increasing their spending by 0.9%, better than had been expected.
French GDP: Wednesday, 7:45. Wednesday, 7:45. France reported a healthy growth rate of 0.5% q/q in the Flash version of GDP. This will likely be confirmed in this second release for Q3
Spanish Flash CPI: Wednesday, 8:00. The fourth-largest economy in the euro-zone saw a rise of 1.6% y/y in October. This was weaker than expected but not far from the levels seen beforehand.
German CPI (preliminary): Wednesday: the German states publish the data during the morning and the all-German number is out at 13:00. In October, Germany reported no change in prices, weaker than +0.1% that had been expected. This dragged down the euro-zone figure.
German Retail Sales: Thursday, 7:00. German consumers expanded their buying by 0.5% in September after a slide in August. The German economy leans more towards exports, but consumption is also looking good.
German Import Prices: Thursday, 7:00. Prices of imported goods such as oil impact consumer prices. After a few months of drop and/or missing expectations, a rebound was recorded in September: 0.9%. We will now get the somewhat belated figures for October.
French CPI (preliminary): Thursday, 7:45. The second-largest economy in the euro-zone publishes an early assessment of price development in November. Back in October, it reported a price rise of 0.1%, exactly as expected.
German Unemployment Change: Thursday, 8:55. The German job market is booming and for quite a while. The high level of employment puts the focus on low wages. In any case, 11K people came out of unemployment in September. The data for October will likely be similar.
CPI (flash): Thursday, 10:00. After the major countries have already released their own figures, we get the flash figures for the whole euro area. October was quite disappointing with 1.4% in headline inflation and only 0.9% in core CPI, quite a setback after this figure had already advanced.
Unemployment Rate: Thursday, 10:00. The unemployment rate in the euro-zone continues falling gradually and it has dipped under 9% in September, hitting 8.9%, the lowest since April 2009. We may see another improvement now.
Manufacturing PMIs: Friday morning: 8:15 for Spain, 8:45 for Italy, final French figures at 8:50, final German data at 8:55 and the final euro-zone figure at 9:00. The Spanish manufacturing sector has been expanding more rapidly in October according to Markit, with 55.8 points, significantly above the 50-point threshold that separates expansion and contraction. Italy, the third-largest economy, saw 57.8 points, even better.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar started the week around the 1.1780 level (mentioned last week). It then made a move to the upside.
Technical lines from top to bottom:
The cycle high of 1.2090 looms above. 1.20 is the obvious round level and also worked as resistance in September.
1.1910 held the pair down back in August. 1.1860 capped the pair in August and in October while working as support in September.
1.1760 served as a cushion in November and also played a role beforehand. 1.1710 was the high of August 2015 and also worked as support in November.
1.1670 was a swing low in October. and hasn’t worked too well. The 2016 high of 1.1620 slowed down the pair also in October.
1.1555 was the low point in November and works as a cushion. It is followed by the round number of 1.15.
1.1445 is the June 2017 peak and immediate resistance. The next level of support is only 1.1370.
I remain bullish on EUR/USD
Euro-zone data is looking great and Germany’s political issues will eventually be resolved. The worries about inflation in the US alongside another political battle about tax cuts could weigh on the dollar.
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