EUR/USD Forecast May 18-22

EUR/USD was was initially pressured to the downside but then reached new highs in another volatile week. What’s next for the pair? Forward looking indicators stand out now. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Euro-zone GDP figures were mixed, with stronger than expected numbers from France and Italy but slower growth from Germany that eventually led to a small miss in the overall growth numbers. Draghi dragged the currency down once again by reiterating that QE will be fully implemented. But the pair has two sides and yet another disappointing retail sales report hit the dollar hard. Better than expected jobless claims and other figures only partially compensated.

Updates:EUR/USD daily chart with support and resistance lines on it.

 

1. German ZEW Economic Sentiment: Tuesday, 9:00. This 275 strong survey is published early in the month and tends to have a significant impact. After long months of rises, we have seen a slide in business confidence in April, with economic sentiment scoring 53.3 points. Another tick down is on the cards to 50.1 points. The all-European number is also expected to slide from 64.8 points seen last month to 62.4 now.
2. Bundesbank Monthly Report: Monday, 8:00. The German central bank publishes a monthly assessment of the current and future situation of the euro-zone largest economy. Projections about growth, employment and inflation shape the decisions of politicians and also of the ECB.
3. Final CPI: Tuesday, 9:00. According to the initial publication, prices in the euro-zone remained flat in April, while core inflation remained at 0.6%. The road to the ECB’s 2% or a bit below mandate is still long. A confirmation of these figures is expected.
4. Trade Balance: Tuesday, 9:00. The euro-zone enjoys a surplus in its balance of trade, driven at large by German exports. After a whopping +22 billion in February, a similar number is on the cards for March: 23.2 billion.
5. German PPI: Wednesday, 6:00. Producer prices also feed into the mix of inflation data. A rise of 0.1% was seen in March and a repeat of this figure is on the cards for April.
6. Flash PMIs: Thursday: France at 7:00, Germany at 7:30 and the whole euro-zone at 8:00. In April, Markit’s purchasing managers’ indicators have shown a mixed picture for France, Europe’s second largest economy. Manufacturing PMI has scored 48 points, below the 50 point threshold separating growth and contraction. An advance to 48.6 points is now expected. Services has been positive, with 51.4 points and is now poised for 52 points. Germany has seen better numbers, with manufacturing at 52.1 and 54 for services. These are now expected to slide to 51.9 and 53.9 respectively The whole euro zone had similar numbers to Germany: 52 in manufacturing which is now predicted to hit 51.8 and 54.1 in services, which could edge down to 53.9.
7. Current Account: Thursday, 8:00. Similar to the trade balance numbers, the euro area enjoys a significant surplus of 26.4 billion in the latest figure for February. A slight decrease could be seen now to 24.3 billion. This surplus keeps the euro bid.
8. ECB Meeting Minutes:  Thursday, 11:30. Postponed from the previous week. In the last rate decision held back in mid April, Draghi brushed off speculation about an early end to the QE program and sounded determined. The minutes could reveal differences between German members and others, and also show what the Governing Council thinks about the recovery: is it gaining ground or is it still fragile?
9. Consumer Confidence: Thursday, 14:00. The official survey of 2000 consumers has shown a renewed deterioration of confidence after quite a few months of improvement. The figure for March stood on -5 points, down from -4. The negative number reflects pessimism. Nevertheless, this is the best result since 2007. The same result is on the cards now.
10. German Final GDP: Friday, 6:00. The final assessment of Q1 GDP is expected to confirm the initial print of +0.3% growth. The numbers are rarely modified for the zone’s powerhouse.
11. Mario Draghi talks: Thursday, 17:30, Friday 8:00. The European Central Bank convenes in Sintra and president Mario Draghi gives the opening remarks on Thursday and another speech on Friday. Later on Friday, Draghi will participate in a panel, As the conference focuses on employment and inflation, market sensitive topics, we could certainly hear some market moving comments, as we heard recently. Will Draghi hit the euro again?
12. German Ifo Business Climate: Friday, 8:00. IFO is considered Germany’s No. 1 think-tank. Despite being released after the ZEW figure, IFO’s publication carries a lot of weight. As expected, IFO’s number ticked up to 108.6 points in April. A small drop is likely for the month of May to 108.3 points.

* All times are GMT

EUR/USD Technical Analysis

Euro/dollar started the week with a slide but drifted back up to the 1.12 level (mentioned last week).

Live chart of EUR/USD:

Technical lines from top to bottom:

We start from higher ground once again: 1.1680 has been a top early in the year. The round level of 1.16 is also of importance. Towards the next level, 1.1535 is also of importance.

The round level of 1.15 has a psychological impact and it also worked as support in the past. 1.1450 capped the pair during February’s recovery attempts and also during May.

Below, the historic line of 1.1373 (from November 2003) still has a role as resistance. 1.1290, which was a peak in April and support in February is significant resistance.

The round number of 1.12 served as resistance to a recovery attempt and is now a pivotal line. It is followed by a low seen in January of 1.1113 which is nearly 0.90 on USD/EUR.

1.1050 was a high point in March 2015 and now works as important support before the round level of 1.10. This is still a battle line.

The next line was minor support back in October 1999: 1.0910. It was resistance back then and was tested once again in March 2015. This is followed by 1.0815 which worked in both directions.

The next line is 1.0760, which was the low point in both July and August 2003. 1.0715 joins the chart after temporarily capping the pair in April 2015.

1.0660 worked nicely as support in April 2015.  1.0615, which worked in both directions during March 2015 and is better at support.

Another minor line is 1.0550, for a role as support in the same period of time. The very round level of 1.05 served as support during 2003. The lowest level in over 12 years is 1.0462 and this makes it critical support.

Below this point we have the very obvious level of 1 – EUR/USD parity, which is already eyed by more and more analysts

I remain bearish on EUR/USD

Monetary policy divergence continues playing a critical role in weighing on the euro and lifting the greenback. Despite the recent worries about the US economy, the Fed is still set to tighten before the ECB. Reminders about the fragility about the European recovery will probably appear for a second week in a row, and also Draghi could weigh on the currency again.

 Source:http://www.forexstrategieswork.com/eurusd-forecast-may-18-22/?subid=gr170515