EUR/USD dropped as the US Dollar returned to dominating the scene and amid the ongoing Italian drama. What’s next? The ECB Meeting Minutes stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The Italian government officially agreed on a budget deficit of 2.4%, above the EU request of 2%. They tried to sweeten it by promising lower deficits in 2020 and 2021. The verdict from the Commission still awaits. The US Dollar jumped thanks to upbeat data, yields that jumped above 3.20%, and Fed Chair Powell’s hawkish words: he is open to setting interest rates above inflation: tight monetary policy. The NFP missed expectations with 134K but it was countered by an upwards revision and OK wage growth. Euro-zone data disappointed with unimpressive PMI’s and a drop in retail sales.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar was doing OK initially but then it fell sharply, losing the support at 1.1530 mentioned last week.
Technical lines from top to bottom:
1.1915 was the low point in January and remains relevant. 1.1850 was the peak on June 14th, before Draghi sent the euro down.
1.1815 was the high point in September. 1.1750 held the pair no less than four times in July and remains a powerful level.
1.1720 is a veteran line that worked in both directions and it capped the pair in mid-September. 1.1650 was a swing low in late August and is very closely followed by 1.1615 which played a pivotal role.
1.1570 was the low point as September came to an end 1.1530 supported the pair twice in August, making it an important line.
1.1460 was the low point in the initial drop in October 2018. 1.1435 held the EUR/USD down when it was trading around the yearly lows.
1.1365 temporarily cushioned the drop in EUR/USD on its way down. 1.1300 is a round number that held the pair in mid-August and also held the pair down in June 2017.
I remain bearish on EUR/USD
Even if everything with Italy is resolved, the basic fundamentals have not changed: the Fed is tightening and the ECB is moving only very gradually towards the exits. The ECB Meeting Minutes will serve as a reminder.
Our latest podcast is titled Too hot or too cold? The world is watching the Fed
Follow us on Sticher or iTunes
- GBP/USD forecast – Pound/dollar predictions
- USD/JPY forecast – analysis for dollar/yen
- AUD/USD forecast – the outlook for the Aussie dollar.
- USD/CAD forecast – Canadian dollar predictions
- Forex weekly forecast – Outlook for the major events of the week.