EUR/USD Rate: Forecast and Data for Next Five Days
The EUR/USD conversion is quoted at 1.0638 at the start of the new week.
The pair has broken below its rising channel - in place for most of 2017 thus far - and fallen to a point above our downside target at 1.0605.
The very short-term trend is down, but the 50-day MA lies just beneath and would be expected to act as a formidable barrier to more downside.
Not far below at 1.0489 is the S1 monthly pivot, another tough barrier.
Given the target for the breakout from the channel has now almost been reached, envisaging more downside is difficult and would require confirmation from a break below 1.0540 with the next target just above the S1 at 1.0490.
Data, Events for the Euro
Monday see’s the release of growth forecasts from the European Commission, which are expected to show steady continued growth in the region, reinforcing the currently quite positive investor outlook for the Eurozone.
The ZEW Sentiment Index, which is a survey of financial professionals, and is normally a good leading indicator for the outlook for the economy is scheduled for release at 10.00 on Wednesday.
The previous 17.92 result is forecast to show a rise to 23.2 in February.
Thursday sees the release of the minutes from the last European Central Bank (ECB) policy meeting, which investors will especially be scrutinizing for any signs of policy tightening, possibly in the form of discussions of tapering current accommodation.
The Bigger Picture...
Don't be surprised if the Euro completely ignores the data and ECB-related events as it would appear that a notable degree of political risk is being absorbed by the single currency ahead of French elections.
Financial markets are focused on the French presidential election, but there is another, nearer-term catalyst for euro weakness: the stalled talks between Greece and its international creditors.
"If the impasse isn't resolved by the time Eurozone finance ministers meet on Feb. 20, politics will make it hard to resolve afterwards. And if the IMF pulls out, both Germany and the Netherlands have said they won't participate further," says Mathieu Reaud at UBS.
We have flagged the prospect of Grexit (Greece leaving the Eurozone) as a distinct possibility for 2017.
While this would be good for Greece we believe, and good for the strength of the remaining Eurozone, we would anticipate short-term uncertainty to weigh on the Euro.
Of interest is just how keen Germany are to push Greece to the exit door ahead of key elections later in the year.
German finance minister Wolfgang Schäuble last week said Greece must leave the Eurozone if it wants some of its debt cut by Germany and fellow European creditors.
He told German broadcaster ARD that debt forgiveness would be in violation of European rules:
“We can’t undertake a debt haircut for a member of the European single currency, it’s ruled out by the Lisbon Treaty. For that, Greece would have to exit the currency area. The pressure on Greece to undertake reforms must be maintained so that it becomes competitive, otherwise they can’t remain.”
“The odds of another Greek crisis are rising. The long-lasting stand-off between the IMF, Germany and Greece has heated up, and no easy solutions are in store. The current approach will inevitably lead to another escalation, maybe also Grexit,” says Jan von Gerich, Global Fixed Income Strategist at Nordea Markets in a note to clients.
All this uncertainty makes for a weaker Euro going forward we believe.
Week Ahead for the Dollar
Factory Gate Price Inflation data released at 13.30 GMT on Tuesday, February 14, is expected to show a rise of 0.3% in January compared to the 0.2% previous result.
Federal Reserve Chair Janet Yellen is set to testify to Congress on Tuesday at 15.00 and then at the same time on Wednesday.
Her comments will be analysed for clues as to when the Federal Reserve are likely to increase interest rates.
But there is a risk that recent lacklustre earning’s data may lead Yellen to backtrack ever so slightly on raising rates, in which case the Dollar will pull-back.
Other data includes Core CPI for January at 13.30 on Wednesday, with a 0.2% rise expected, and Retail Sales released at the same time and expected to rise by 0.1% from a previous 0.6%, and Core expected to increase by 0.4% from a previous 0.2%.
Thursday sees the release of Building Permits at 13.30 which is forecast to rise to 1.230m and the Philadelphia Fed Manufacturing Index, forecast to 18.0 in February from 23.6 previously.
