EUR/USD Rate: Technical Forecast for Week Commencing July 31

The Euro to US Dollar continues rallying and has now achieved new highs of 1.1777 for 2017.

EUR/USD has been moving up within a neat channel but the most recent move higher actually broke out above the upper channel line it was so steep:

This breakout could be a sign of exhaustion and if so the exchange rate may be about to reverse and fall back down within the channel, with a possible initial target at the R2 monthly pivot support level, located at 1.1657.

Nevertheless momentum is still quite strong and in the absence of any actual downside from price action itself, the pair technically remains in an up-trend, which would be expected to continue.

Given the overbought look and feel of the chart, however, we would ideally wish to see a break above the 1.1777 highs for confirmation of an extension, to an initial target at 1.1900.

Data to Watch for the Euro

Eurozone inflation and unemployment data for July has already just been released on Monday morning and has beaten analyst’s expectations after core rose to 1.2% and unemployment fell to 9.1%.

Overall data is expected to continue supporting the Euro as it will probably continue to show slow but steady growth.

Purchasing Manager Indices for manufacturing and services are out on Tuesday, August 1 and Thursday, August 3 respectively, at 9.00 BST, and are expected to show no change from 55.8 and 55.5 in June, which was, nevertheless, an 8-month low.

Eurozone GDP data for the second quarter is out at 10.00 on Tuesday and forecast to show a 2.4% rise year-on-year – from 1.9% previously - and 0.4% in Q2 compared to Q1.

The European Central Bank’s Economic Bulletin is scheduled for release at 9.00 on Thursday.  

Data to Watch for the Dollar

Data starts with Pending Home Sales for June, released on Monday, July 31, at 15.00 BST.

A major gauge of manufacturing in the US, ISM Manufacturing PMI is out at 15.00 BST on Tuesday August 1, and is expected to show a decline to 56.5 from 57.8 previously.

The Federal Reserve’s preferred method of measuring inflation – Personal Consumption Expenditure is also out on Tuesday, but at 13.30.

It is expected to show PCE creeping up by 1.4% annually (from 1.3%) previously and 0.1% month-on-month in June.

ADP Payrolls is released on Wednesday August 3, but the big release comes at the end of the week, when Non-Farm Payrolls are released at 13.30 on Friday August 5.

“We expect a solid 190k print, taking into account risk for a sharp pullback in government jobs as labor market indicators on balance point to a 200k+ gain. A lower unemployment rate (4.3% vs 4.4%) and solid 0.3% gain on avg hourly earnings should garner a hawkish market reaction,” commented Canadian investment bank, TD Securities in a note on the week ahead.