EUR USD Weekly Forecast 06 – 10 June 2016.

European Central Bank left rates unchanged during its policy meeting held on Thursday last week. Such course of action was fully in line with expectations considering that there are additional stimulus measures that are due to be implemented during June, including corporate bond purchase program and long-term lending to banks.  During press conference after ECB meeting, president Draghi noted that economic recovery within Euro Zone is proceeding slowly, supported by domestic demand. As for inflation, he noted ECB expectations that it will remain very low or even negative during first half of this year, finally picking up during second half of a year. ECB revised projections on inflation for this year to 0.2% and GDP at 1.6%.  Lately published GDP estimate growth for Euro Zone during first quarter was 0.5%q/q, while inflation reached -0.1% on a yearly basis during May. President Draghi did not exclude possibility of further quantitative easing, if necessary, with interest rates at present or lower level.

Very disappointing data released on US non-farm payrolls on Friday placed a shadow on potential Fed rate increase during June meeting. Quite optimistic attitude of several Fed officials on June/July rate hike during previous weeks has increased market expectations that strengthening of monetary policy is ahead, but with increase of only 38k in nonfarm payrolls during previous month, question is whether US labor market is actually improving as expected by FOMC members. On the other side, other released data on US economy are showing modest improvement. Unemployment rate for May fell to 4.7%, more than expected, while CPI in April reached 1.1% slowly heading toward targeted 2% by Fed. Fed’s Beige book released during previous week revealed modest growth with growing cost of labor within twelve Fed districts during period of April through mid-May. How current economic conditions and labor market developments are perceived by Fed officials is going to be seen during next FOMC meeting scheduled for June 14-15. Prior to that, Fed Chair Yellen is holding a speech on Monday, where she might provide some view on current labor market developments.

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The currency pair EUR/USD finished week at level  1.1360.



Short review of major fundamentals released during previous week is following:

Monday , May 30, 2016 :

  1. German Consumer Price Index: results for May show modest increase in German inflation of 0.3% on a monthly basis, from -0.4% posted for April. Result is fully in line with market consensus. Yearly inflation has rebound to level of 0.1% from -0.1% posted for April.

Tuesday, May 31, 2016 :

  1. German Retail Sales: released results show decrease in retail sales of -0.9% in April from previous month, below market expectations of 0.9%. However, compared to the same period of last year, retail sales are significantly up for 2.3% y/y, compared to 0.6% posted previously and also above market consensus at 1.7%.
  2. German Unemployment Rate is continuing down trend in May reaching 6.1% from 6.2% posted previously. Figure is also better from market expectation at 6.2%.
  3. Euro Zone Unemployment Rate: there has not been any change in unemployment rate during April from 10.2% previously posted. Result was fully in line with market consensus.
  4. Euro zone Consumer Price Index: estimated inflation in Euro zone for May is modestly better reaching -0.1% on a yearly basis from -0.2% posted for April. Result was fully in line with market consensus. Core inflation is also modestly up to 0.8%y/y from 0.7% released for April.
  5. US Personal Income: there has been no change in personal income during April from 0.4% previously posted, which was also fully in line with market consensus.
  6. US Personal Spending: posted figures show significant increase in personal spending to 1.0% in April, from 0.0% posted previously. Figure is also better from market consensus at 0.7%.
  7. US Personal Consumption Expenditure Core: there has not been any change in core PCE of 1.6% on a yearly basis from previously posted, while indicator is increased for modest 0.2% compared to previous month.
  8. US Consumer Confidence: index surprisingly dropped to 92.6 in May from 94.7 posted previously and also below market expectation of 96.1.

Wednesday, June 01, 2016 :

  1. US ISM Manufacturing: results for May show modest increase in manufacturing sentiment to 51.3 from 50.8 previously posted. Result is also above market consensus at 50.4.

Thursday, June 02, 2016 :

  1. Euro Zone Producer Price Index: released figures for April show drop of -0.3% on a monthly basis, from 0.3% posted previously and below market consensus at 0.1%. PPI on a yearly basis is increased to -4.4% from -4.1% posted previously and below market expectation at -4.1%.
  2. ECB Rate Decision: no change, rate is left at level of 0.00%.
  3. ECB Deposit Facility Rate: no change, rate is left at level of -0.4%.
  4. ECB Marginal Lending Facility: no change, rate is left at level of 0.25%.
  5. ECB Asset Purchase Target: no change, target is left at level of Eur80b.
  6. ADP Employment Change: released figure for May show modest increase to 173k from 156k previously posted and below market consensus at 175k.
  7. Initial Jobless Claims decreased to 267k during previous week from 268k posted previously. Figure is also better from market estimate of 270k.

Friday, June 03, 2016 :

  1. Euro zone Retail Sales: posted figure show no change in retail sales compared to previous month, which is below market expectation of 0.4%. Previously posted figure was -0.6%. There is also modest slowdown on a yearly basis reaching 1.4% in April, down from 1.8% posted previously, and below market expectation at 2.1%.
  2. US Unemployment rate: released data for May show significant drop of unemployment in the US to 4.7% from 5.0% posted previously. Figure exceeded market consensus at 4.9%.
  3. US Change in Non-farm Payrolls: released data for May show significant drop in non-farm payrolls to 38k from 123k posted previously and significantly below market consensus at 160k.
  4. US Average Hourly Earnings: released data show modest increase in hourly earnings of 0.2% compared to previous month, which is fully in line with market consensus. Previously posted figure was 0.3%.
  5. US Trade Balance: trade deficit in April decreased to $-37.4b from $-40.4b and modestly better from market consensus at $-41.0b.
  6. US ISM Non-Manufacturing Composite:
  7. US Factory Orders: released data show modest increase in factory orders by 1.9% in April from 1.1% posted previously and above market expectation at 0.8%. Excluding transportation, factory orders are up for 0.5%.
  8. US Durable Goods Orders: final release for April show no change from previously posted 3.4%. however, excluding transportation, figure is revised to 0.4% down from previous release of 1.0%.



Below are some of the significant indicators from EUR/USD Economic Calendar to watch during next week:

Fundamentals 6-10JuneNext week is going to be relatively relaxed concerning fundamentals. However, FEDs Chair Yellen speak is scheduled for Monday, which would be closely watched by market for signs on potential FED`s policy moves during next policy meeting held during June and July.

German Industrial Production: data for April will be released. After strong industrial output in January of 3.3% m/m, German IP modestly dropped during February to -0.5%m/m and March to -1.3%.  Drop is evident also on a yearly basis, with 0.3% reached in March.

Euro Zone Gross Domestic Product: third estimate for first quarter will be released. Latest posted figure was 0.5% on a quarterly basis and 1.5% on a yearly basis.

German Trade Balance: results for April will be posted. Considering German export orientation, trade surplus represents one of important indicators for German economy. From the beginning of the year trade surplus is following up trend, with Eur26.0b reached during March. However, it must be noted that majority of trade surplus came from cut in imports.

German Consumer Price Index: second estimate for May will be posted. Considering deflation trend within Euro Zone, German CPI has been quite volatile since the beginning of the year, reaching 0.1% on a yearly basis during May.

University of Michigan Confidence: first estimate for June will be released. As of the end of May, consumer confidence reached level of 94.7, which is the highest level since the beginning of this year.

Update on released results on a daily basis you can follow-up on Euro Dollar News and EUR/USD Economic Calendar.


EUR/USD Technical Analysis

During first four days of previous week currency pair was trading between levels of 1.11 up to 1.12. Extremely weak data posted on nonfarm payrolls on Friday pushed EUR/USD to the levels of 1.1360 where currency pair finished previous week.

Next resistance levels are at 1.1390 and further to long term resistance at 1.1450. Inability to break resistance level would revert trend toward support levels found at 1.1320 down to 1.12.

Relative Strength Index over 14-day period is currently moving around 60, without indication on trend reversal.

 EUR/USD Chart :

Chart 6-10June

Check also Euro Dollar History Graph.


For the next week I am neutral on EUR/USD

ECB left rates unchanged as expected. With additional stimulus in terms of corporate bond purchasing program and long-term loans to banks starting to be operative during June, effects are to be seen in the future period. What is evident, and also voiced by ECB officials is that general demand needs to be generated, for which structural reforms need to take place within Euro Zone, as noted by President Draghi. On the other side, although data on US economy is implying on general economic improvement and growth, it is still unclear whether labor market is progressing as per Feds expectations. Market uncertainty over next Fed move pushed currency back to levels traded during middle of May.

For next week I stay neutral on currency pair. There is a possibility of some downward correction of current levels and currency pair trading between levels of 1.13 up to 1.14.


Do you want to know what investment banks think of the EUR / USD? Check out the Euro to Dollar Forecast

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