Saturday, August 6, 2016

EUR/USD Forecast August 8-12

EUR/USD was trading in a more volatile manner, but this did not hold, and the pair fell. It certainly enjoyed a wider trading range. German GDP stands out this week. Here is an outlook for the highlights of this week.

German factory orders disappointed with a drop, casting worries about the strength of the largest economy in the euro-zone. PMIs were in line with projections. In the US, data was quite mixed, with PMIs slightly missing expectations, until the NFP came. The US gained 255K jobs, and other components of the report were also positive. EUR/USD dropped under the H&S pattern and closed the week lower.

Important Events

  1. German Industrial Production: Monday, 6:00. Industrial output in the continent’s powerhouse disappointed with a drop of 1.3% in May. The data for June will likely be more upbeat with +0.9%.
  2. Sentix Investor Confidence: Monday, 8:30. This investor barometer showed a sharp reaction to Brexit in the July edition. It fell sharply from 9.9 to 1.7 points. A bounce to 3.6 is on the cards.
  3. German Trade Balance: Tuesday, 6:00. German exports and the resulting trade surplus keep the euro bid. The locomotive had a surplus of 22.2 billion euros in May. A level of 23.2 billion is on the cards.
  4. French Industrial Production: Wednesday, 6:45. Europe’s second largest economy saw a drop of 0.5% in its industrial output in May after the significant rise of 1.2% in the previous month. A rise of 0.3% is likely now.
  5. French CPI (final): Thursday, 6:45. According to the initial publication, prices dropped 0.4% in July. The final release is projected to confirm it.
  6. German GDP: Friday, 6:00. Europe’s largest economy enjoyed a high growth rate of 0.7% in Q1, pushing up the whole euro-zone economy. The second quarter saw slower growth according to all assessments. A growth rate of 0.3% is projected. Note that at the same we will get the final German CPI but changes are rare, and the GDP report is far more important
  7. French Non-Farm Payrolls: Friday, 6:45. This quarterly report on jobs showed an advance of 0.2% in Q1. We now get the preliminary figure for Q2. An advance of 0.2% is predicted.
  8. Italian GDP: Friday, 8:00. Italy, the third-largest economy, saw a growth rate of 0.3% in Q1. A growth rate of 0.2% is what markets are looking for.
  9. Flash GDP: Friday, 9:00. The initial release of euro-zone GDP showed a growth rate of 0.3% in Q2, but this figure did not include Germany’s number. This revision will already include the largest economy. No change is expected.
  10. Industrial Production: Friday, 9:00. Industrial output fell 1.2% in May, worse than had been expected. A bounce could be seen now, worth 0.6%.

Technical Analysis

Euro/dollar traded under 1.1190. The pair did break higher but was blocked at 1.1230. But from there things turned sour and the pair dropped.
The pair traded in a downtrend channel and has now broken above it. The breakout was followed by a breakdown.

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