EUR/USD Forecast Aug. 27-31 – Can the hesitant recovery continue?
EUR/USD[1] enjoyed a second week of advances but the US Dollar is not giving up. What’s next? Preliminary inflation figures for August stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The ECB meeting minutes did not break ground on the usual messages from the central bank: cautious optimism and a gradual removal of the stimulus. On the other side of the Atlantic, the FOMC minutes were upbeat on the US economy and increased the odds of a rate hike in September. The Fed moves forward despite criticism from Donald Trump. The President wants lower rates and temporarily weighed on the US Dollar. Trump was implicated in illegal campaign financing as his former lawyer and “fixer” Micahel Cohen testified against him. On the other hand, US-Chinese talks did not go very far and this boosted the greenback.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
German Ifo Business Climate: Monday, 8:00. Germany’s No. 1 think-tank surveys some 7,000 business for its broad business climate measure. In July, IFO showed stable confidence with a score of 101.7 points. A similar number is likely now.
Monetary data: Tuesday, 8:00. The pace of growth of money in circulation accelerated to 4.4% in June, beating expectations and showing an extended increase. Private loans slightly disappointed with an annual growth rate of 2.9%, identical to the previous six months.
German GfK Consumer Climate: Wednesday, 6:00. This consumer survey dropped from the highs in July, standing at 10.6 points. We could see another tick down now.
French GDP: Wednesday, 6:45. The updated version of France’s Q2 GDP growth will likely confirm the initial read of 0.2%. France lags behind euro-zone growth which stood at 0.4% according to the latest estimates.
Spanish CPI: Thursday, 7:00. The fourth-largest economy in the euro-zone kicks off the series of flash inflation reads for August. Spain reported an annual increase of 2.2% in July, slightly below expectations.
German Unemployment Change: Thursday, 7:55. The German labor market is looking good with constant drops in the number of the unemployed. A slide of 6,000 jobless was reported in June. Another drop is likely for July.
German CPI: Thursday, during the morning with the all-German number at 12:00. The largest economy in the euro-zone saw a monthly increase of 0.3% in the Consumer Price Index in July. Any surprise in the figure for August will impact the all-European number.
French CPI: Friday, 6:45. The French inflation figure will be the last major release before the all-European one. A drop of 0.1% was seen in July. We could see an increase now.
CPI Flash Estimate: Friday, 9:00. The euro-zone saw a divergence between headline inflation and core inflation. The increase in energy prices explains the 2.1% CPI level in July, just above the ECB’s 2% target. However, the general slack in the euro-zone can explain the 1.1% core inflation.
Unemployment Rate: Friday, 9:00. The jobless rate is falling constantly since the peak in 2013 and it stood at 8.3% in June. We could see another fall in the report for July.
EUR/USD Technical Analysis
Euro/dollar moved higher and was rejected at the 1.1625 level (mentioned last week[2]).
Technical lines from top to bottom:
1.1720 is a veteran line that worked in both directions, last seen in November. 1.1676 was a temporary low point in late May.
1.1625 provided support to the pair several times in June and July. It is followed by the mid-July trough of 1.1575.
Below, 1.1508 is the previous 2018 low. 1.1445 capped the pair on its way up in mid-August.
1.1365 was a temporary low on the way down in August. 1.1300 is a round number that held the pair in mid-August and also held the pair down in June 2017.
1.1115 was a low point also in that period of time. The very round level of 1.10 is next.
While the general trend remains to the downside, the last week of August may see some consolidation. Later on, the Fed’s hawkishness and the ECB’s hesitance to move forward could weigh on the pair. In addition, the prospects of further US tariffs on China support the greenback.
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