EUR/USD Forecast October 7-11

EUR/USD reached a new 8 month high on the back of the US government shutdown, but soppted at resistance. Draghi’s speeches, Industrial data and the IMF meeting are the highlights of this week. Check out these events among others, and an updated technical analysis for EUR/USD, now in a higher range.

The ECB left all rates unchanged postponing new policy moves until the fragile euro zone recovery strengthens. The ECB became concerned with rising market interest rates over the summer, and pledged to keep the benchmark rates at a minimum low for an extended period. And while the central bank remains ready to act with new LTROs, falling inflation is currently not a worry. Draghi’s content message add fuel to the EUR/USD fire, that was lit by the US government shutdown – an unresolved theme dominating the news.

Updates:

EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

1. Sentix Investor Confidence: Monday, 8:30. Euro zone sentiment improved for the first time in more than two years in September a vote of confidence in the Eurozone economy, reaching 6.5 points after minus 4.9 in August signaling the end of recession. The reading beat market forecast for minus 4. A boost in exports and increased spending pulled the euro zone out of recession in the second quarter of 2013. A further boost to 10.9 is expected now.
2. German Trade Balance: Tuesday, 6:00. Germany’s trade surplus narrowed in July to 14.5 billion following 15.8 billion in the previous month as exports weakened. In unadjusted terms, trade surplus decreased slightly to 16.1 billion euros from 16.9 billion euros, amid a rise in imports. Exports to the European Union as a whole edged up by 0.8 percent and exports to the rest of the world were up by 3.6 percent, the statisticians said. A rise to 15.1 billion is expected.
3. German Factory Orders: Tuesday, 10:00. German factory orders declined in July, down 2.7% following a 5.0% boost in demand by the Paris Air Show a month earlier. Economists expected a small drop of 0.7%. On a yearly base, orders advanced 2%, when adjusted for the number of working days. German economy expanded 0.7% pulling the 17-nation euro area out of its longest-ever recession. Manufacturing expanded and business confidence increased to a 16-month high in August, indicating a solid pick-up in German economy. A pick-up of 1.2% is expected now.
4. German Industrial Production: Wednesday, 10:00. German manufacturing output fell 1.7% in July, following a 2.0% gain in the previous month. However a two-month average suggested that industry in Europe’s largest economy is on the path to recovery. The current drop in production could be related to the previous month, where output boosted 2.0% driven by a high number of public holidays. The general trend indicates growth in manufacturing and significantly stronger in construction. A rise of 1.1% is expected.
5. French Industrial Production: Thursday, 6:45. French industrial output fell unexpectedly by 0.6% in July after a 7.4% plunge in the previous month, due to lower car production and mineral refining, casting shadow over French recovery in the beginning of the third quarter. The data suggests the economy is still weak after pulling out of recession in the second quarter. A rise of 0.7% is forecasted.
6. ECB Monthly Bulletin: Thursday, 8:00. The ECB monthly bulleting released in September revealed that the Euro area has recovered during the Q2 of 2013 and is expected to continue its recovery in the remaining year however, the Euro Zone should continue the reforms, in order to strengthen recovery. The Euro area real GDP, edged up 0.3% in the second quarter of 2013. ECB projected an annual GDP decline of 0.4% in 2013 and an expansion of 1.0% in 2014. ECB interest rates will remain at present or lower levels for an extended period of time.
7. Mario Draghi speaks: Thursday, 13:00. ECB President Mario Draghi is scheduled to speak in New York where he is likely to discuss the Eurozone recovery and his plans for further easing measures to ensure a speedy recovery. Market volatility is expected. He managed to deflect sensitive political questions in the last statement. What will he say now?

*All times are GMT

EUR/USD Technical Analysis

Euro/dollar started the week with a Sunday gap and dropped to 1.3476. It then stabilized in the previous range before pushing higher and trading between the 1.3570 and 1.3650 lines (mentioned last week) before making a last minute tumble.

Technical lines from top to bottom:

1.3940 was a peak in September 2011, over two years ago, and is just before the round number of 1.40. 1.3870 capped the pair during the fall of 2011 and served as the “shoulders” in a H&S pattern. 1.38 is a round number and also worked as a temporary cap during that period of time.

1.3710 was the 2013 peak, and is getting closer. The line is the next big target.1.3650 temporarily capped the pair during that period of time and is stronger after capping the pair in October 2013.

1.3570 is the swing high of September 2013 and also proved itself as resistance afterwards. 1.35 is a nice round number and a pivotal line or “magnet” within the range.

1.3460 worked as support in late September and should be watched for any downside moves. 1.3415 was the peak back in June and works as another line of support.

1.3325 worked as a double top in early September and it was crossed only with a Sunday gap. It remains a clear separator of ranges. It is followed by 1.3240, which capped the pair in April and also had a role in August. It worked as support in September.

1.3175 capped the pair during July 2013. 1.3100 is worked as temporary resistance in December 2012 and is becoming more important once again, after capping a recovery attempt in June and then in July and providing support in September.

It is followed by 1.3050, which proved be strong support in May 2013, defending the round number in more than one occasion, but it is less significant now. The very round 1.30 line was a tough line of resistance. In addition to being a round number, it also served as strong support and recently worked as a pivot line.

EUR/USD holding well above broken uptrend resistance

The line accompanying the pair since early June was broken by the big surprise and the pair managed to stay on top of it.

I remain bearish on EUR/USD

ECB president Mario Draghi was relatively upbeat and didn’t hint about any upcoming easing (despite falling inflation). In a twist of events, the Italian government survived and Berlusconi was defeated. Nevertheless, EUR/USD ends the week almost unchanged. What will happen when the uneasy economic reality returns to bite? This could come from Greece, Spain or even Germany, which is unlikely to pull all the zone forward.

In the US, the political crisis undoubtedly hurts the greenback. The situation with each day that goes by, but there’s a good chance that the US will resolve its issues sooner than later, and most importantly avoid an unimaginable default, which could have horrible consequences.

More on EUR/USD:

• EUR/USD Momentum Establishes New High - by James Chen
• EUR/USD Maintains Broader Medium Term Upside Bias – Technical analysis
• 5 Most Predictable Currency Pairs – Q4 2013

If you are interested a different way of trading currencies, check out the weekly binary options setups, including EUR/USD and more.

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Forex - USD/CHF weekly outlook: October 7 - 11

The dollar recovered from 20-month lows against the Swiss franc on Friday following reports that Switzerland’s banking regulators are investigating several Swiss banks amid allegations over currency market manipulation.

USD/CHF ended Friday’s session at 0.9073, up 0.88% for the day, after falling as low as 0.8966 on Thursday, the lowest since February 2012. For the week, the pair ended 0.20% higher.

The pair is likely to find support at 0.8966, Thursday’s low and resistance at 0.9135, the high of September 25.

The Swiss franc weakened after Switzerland’s Financial Market Supervisory Authority said it was conducting investigations into several Swiss financial institutions in connection with the possible manipulation of foreign exchange rates.

The dollar looked likely to remain under pressure amid concerns that the first U.S. government shutdown for 17 years would derail the fragile economic recovery and prompt the Federal Reserve to maintain its stimulus program for longer.

Markets were also mulling over how the political impasse in Washington will impact on negotiations to raise the U.S. debt ceiling, which the U.S. Treasury Department has estimated will be reached by October 17.

House Republican Leader John Boehner said Friday the House will not vote on a budget bill without conditions and demanded spending cuts in exchange for raising the government's borrowing limit.

The shutdown meant that Friday’s scheduled release of the U.S. nonfarm payrolls report for September was postponed and no new date was given for the release of the data.

In the week ahead, investors will continued to closely monitor political developments in Washington. 

Delays in U.S. economic data releases look likely to fuel uncertainty over whether the Federal Reserve will hold off on any move to roll back its USD85 billion a month asset purchase program.

Meanwhile, a speech by Swiss National Bank Chairman Thomas Jordan and Swiss data on retail sales and inflation will be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Wednesday, Thursday and Friday as there are no relevant events on these days.

Monday, October 7

The SNB is to release data on its foreign currency reserves. This data provides investors with an insight into the bank’s currency market operations.

Tuesday, October 8

Switzerland is to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity, as well as a separate report on consumer price inflation.

Later Tuesday, SNB Chairman Thomas Jordan is to speak, his comments will be closely watched.

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Forex Weekly Outlook October 7-11

The US dollar has been on the back foot due to the government shutdown. FOMC minutes, Draghi’s speech, US unemployment claims and consumer sentiment are the main events. Here is an outlook on the major market movers of this week.

The US government entered a partial shutdown for the first time in 17 years, as politicians in Washington refused to budge from party lines sending 800,000 nonessential workers home. Economic data in the U.S. was mixed with jobless claims remaining low at 308,000, much better than market forecast. The highly important NFP was not released due to the government shutdown. ISM index disappointed, falling to 54.4 from 58.6 ensuring tapering will not start next month. Will the political conflicts be resolved before the US reaches default? In Europe, Draghi didn’t seem worried about falling inflation and in the UK, the pound took a break from rallying despite good data.

Let’s Start

1. US FOMC Meeting Minutes: Wednesday, 18:00. The last meeting was very closely watched. The Federal Reserve was expected to taper bond buys, but surprised markets with deciding NOT to taper. This sent the dollar to the floor. According to some Fed talk, the call was quite close. We will now get to see how close it was, and perhaps receive hints for the next meetings in October and in December.
2. Australian employment data: Thursday, 0:30. The Australian unemployment rate increased to a four-year high in August, reaching 5.8% following 5.7% in June and July, amid an unexpected contraction of 10,800 positions. Full-time employment declined by 2,600, while part-time jobs fell by 8,200. Economists expected a 10,200 job addition in August. An addition of 15,200 jobs is expected  with no change in unemployment rate.
3. UK rate decision: Thursday, 11:00. The Bank of England is not likely to change policy in its October meeting. On one hand, Carney stated that he “does not see a case for more QE” and on the other hand the central bank pledged to keep rates down via forward guidance in August. It is probably too early to make changes now.
   With UK figures remaining upbeat, a rate hike before 2016 certainly seems possible. However, a stronger pound could discourage such a future move.
4. US Unemployment Claims: Thursday, 12:30. US Jobless claims remained low last week increasing 1,000 to a seasonally adjusted 308,000. However the boost in the service sector cooled in September as firms took on fewer new workers. Due to the partial government shutdown, the highly important NFP report was not released. Nevertheless the job market continues to grow with fewer layoffs and increased hiring. A slight drop to 307,000 is projected this time.
5. Haruhiko Kuroda  speaks: BOE Governor Haruhiko Kuroda is intended to speak in Washington DC. Volatility is expected. Kuroda recently said that the current level of monetary stimulus is appropriate.
6. Mario Draghi speaks: Thursday, 13:00. ECB President Mario Draghi is scheduled to speak in New York where he is likely to discuss the Eurozone recovery and his plans for further easing measures to ensure a speedy recovery. Market volatility is expected. In the press conference around the rate decision, Draghi did not seem worried about the falling inflation.
7. Canadian Employment data: Friday, 12:30. The number of Canadian part-time employees increased by 42,000 in August, leading to a 59,200 Job addition. The unexpected rise lowered the unemployment rate to 7.1% from 7.2% in the previous month. However, despite the positive number, the main rise in new jobs was part-time positions held by older workers. The six-month average of job creation has slowed to 12,000. The Canadian job market is expected to add 59,200 jobs and unemployment rate is expected to remain 7.1%.
8. US UoM Consumer Sentiment: Friday, 12:30. Consumer Sentiment in U.S. plunged unexpectedly to 76.8 in September from 82.1 in August, the Lowest since April, indicating consumer spending may take longer to pick up. Economists predicted a rise to 82.6.

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