EUR/USD Forecast: would data and the Fed send it to 1.1000?
|- EUR/USD bounces from yearly lows, but the bearish potential remains intact.
- Data-loaded week ahead with EU inflation and GDP, and the US Fed and Nonfarm Payrolls.
The EUR/USD pair fell to its lowest in almost two years this week, as investors opted for buying the greenback on the back of political tensions and macroeconomic weakness elsewhere. Furthermore, US data released these days was upbeat, as March Durable Goods Orders bounced sharply and largely surpassed the market's estimates. According to the official report, orders were up by 2.7% MoM, much better than the 0.8% expected. The Nondefense Capital Goods Orders ex Aircraft rose by 1.3% vs. the market's forecast of 0.1%, also surpassing the previous month readings, which suffer modest upward revisions. This Friday, the advanced reading of Q1 GDP posted a solid 3.2%, reflecting the good shape of the American economy. On a down note, quarterly core PCE by increased by just 1.3% vs. the previous 1.8% and the expected 1.6%, providing sort of a negative surprise, as market players were waiting for some inflationary pressures to lift chances of rate hikes. However, this softer inflation data won't change the Fed´s stance.
Across the Atlantic, things weren't so bright. EU Consumer Confidence, as measured by the European Commission declined in April to -7.9 from the previous -7.2. The German IFO survey showed that business sentiment continued deteriorating in April, as the Business Climate Index fell to 99.2 from 99.6 in March, with government bunds falling below 0.0% Wednesday. Government bond yields remained depressed throughout the week worldwide, a sign that concerns don't ease.
The upcoming week will be a recharged one, in terms of macroeconomic releases, with a Federal Reserve monetary policy meeting outstanding next Wednesday. Ahead of the even the US will release Personal Income and Personal Spending figures for February and March, including PCE inflation, central bankers' favorite inflation measure. By the end of the week, the US will release the April Nonfarm Payroll report, with the country seen adding 180K new jobs and continued wages' growth pressure.
The EU will release preliminary Q1 GDP next Tuesday, seen posting a modest 0.3% advance, and preliminary April inflation. Markit will release the final versions of April PMI for both economies.
As said, chances that the Federal Reserve will change its current stance are quite a few. And given the economic health imbalances, the common currency will likely remain unattractive.
EUR/USD technical outlook
The EUR/USD pair bounced from its multi-month low of 1.1110 and is poised to finish the week in the 1.1150 price zone, below its previous relevant lows in the 1.1170/80 region, a sign of more slides likely ahead.
Weekly basis, the pair has further extended its decline below moving averages, with the 20 SMA crossing below the 200 SMA some 200 pips above the current level. Technical indicators remain within familiar levels, although the RSI anticipates another leg south as it gains downward strength at around 38.
In the daily chart, the bearish stance is quite clear as moving averages are correctly aligned above the current level and with persistent bearish strength, while the Momentum indicator nearing its April low. The RSI indicator in this chart recovered modestly from oversold territory, currently at 38, not enough to indicate a possible recovery.
That said, an upward corrective movement is not out of the table, particularly if the pair extends its recovery above the mentioned 1.1170/80 price zone, the immediate resistance. Above it, the next relevant resistance is 1.1245, ahead of the 1.1300 figure. Supports are at 1.1110, followed by the 1.1040/60 price zone. A test of the 1.1000 figure is on the table for the upcoming days, although it won't be an easy bone to break.
EUR/USD sentiment poll
The FXStreet Forecast Poll confirms that a test of the 1.1000 level is on the table for the upcoming week. The survey shows that bears are up to 79% short-term, with an average target of 1.1065. However, and as it was mentioned in previous updates, the market is not ready to break the 1.1000 critical psychological support: sentiment is also bearish in the 1-month perspective, although the number of those betting for a decline decreases to 41% while the average target surges to 1.1138. In the 3-month view, bulls take over with 53% of the polled experts, with the pair seen recovering above 1.1200.
The Overview chart is a clearer reflection of the market's sentiment, with a strongly bearish MA short-term that sees the pair closer to 1.0900 than to 1.1000, and a wide spread of possible targets in the quarterly view, which suggest that market players can't make up their minds on whether the pair will be able or not to break lower. The limited upward potential in this last timeframe skews the risk to the downside.
Related Forecasts:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.