Measures imposed by ECB aimed to cut deflation trend and economical slowdown within Euro area had been in focus during last week. ECB quantitative easing that led European interest rates to negative territory, has been under critical review by German politicians raising concerns regarding its negative influence on savings and pension plans. Significant debt purchase programs conducted by ECB as a way of indirect pumping money into economy also did not made expected results in raising inflation, as posted inflation for March shows almost no movement on a yearly basis. Experts from Deutsche bank have mentioned possibility of ECB to directly inject money into European economy either through direct financing of Governments or public. Although in the history of some other countries this measure had been conducted, it is questionable whether at this specific moment such measure from ECB would give results considering that we cannot see demand even under lowest level of interest rates in the history of Euro. German Chancellor Angela Markel called for European governments to put more effort in order to reverse current slowdown trends. Results of measures imposed by ECB up to now is going to be one of the major topics of meeting next week. Although market does not expect to see any change in interest rates, any additional stimulus is not excluded. Another pressure on deflation trend is coming from decreasing oil prices and together with general economic slowdown, it is currently quite challenging task for ECB to achieve its set targets.

Lately posted figures on US economy did not provide plain view whether the economy is on the clear growth path. Although during previous weeks we have seen very promising improvement in employment and wages segment, figures posted during last week are showing that US economy would still need some time to fully recover. With no change in industrial production, unexpected decrease of Michigan confidence index to 89,7, followed with Consumer Price Index reaching 0,9% on a yearly basis, it is extremely questionable if FED is going to be on a side of increasing further interest rates on a next FOMC meeting as of the end of April. Talks from some FED Governors, like Kaplan and Lockhart are fully in line with what we have already heard many times from FED Chair Yellen, that Fed will take cautions approach when new measures are in question in fear of spillover effect of world recession on US economy. However, fundamentals are currently not proving a clear view on state of US economy and in this sense, it is much more probable that market will see expected rate increase during second half of this year.

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The currency pair EUR/USD finished week at level 1.1282.



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

Tuesday, April 12, 2016 :

  1. German Consumer Price Index (YoY): forecasted figure for March show no change compared to previous month of 0.3%. Figure is also in line with market consensus.
  2. US Monthly Budget Statement : results for March significant increase in monthly budget deficit of $-108b, from previously posted $-52.9b. Figure is also above market consensus of $-104.0b.

Wednesday, April 13, 2016 :

  1. Euro-Zone Industrial Production (YoY) : results for February show decrease in industrial production of 0.8% compared to 2.9% in January. Figure is also below market expectations of 1.3%.
  2. US Advance Retail Sales : results for March decrease in retail sales of -0.3% compared to 0.00% previously reported. Market expectations were at 0.1% .
  3. US Retail Sales Less Autos : results for March very modest increase in sales excl. autos of 0.2% slightly below market expectation of 0.4%. Previously posted results were at 0.00%.
  4. US Business Inventories : results for February show modest decrease in unsold inventories by manufacturers of -0.1% which is fully in line with market expectations. Result for previous month was at 0.1%.
  5. US Federal Reserve Releases Beige Book revealed some current weakness of US economy. The growth has been seen as “moderate to modest”. There is also negative effect of raising USD to manufacturing industry.

Thursday, April 14, 2016 :

  1. Euro-Zone Consumer Price Index (MoM) : results for March exposed significant increase in inflation level to 1.2% on a monthly basis in relation to 0.2% as of February. Result is fully in line with market forecast. However, forecasted March inflation on a yearly basis is still at 0.0%, slightly better from -0.2% outputted during previous month.
  2. US Initial Jobless Claims : modest decrease in initial jobless claims to 253K from 267K posted during previous week. Figure is well below market expectations of 270K.
  3. US Consumer Price Index (YoY) : results for March show modest decrease in US CPI figure on a yearly basis of 0,9%, compared to 1.0% posted for February. CPI is also below market consensus of 1.1%.
  4. US Consumer Price Index excluding Food and Energy (YoY) : results for March show very modest decrease in core CPI figure to 2.2% compared to 2.3% for February. Market expectation was at 2.3%.

Friday, April 15, 2016 :

  1. US Industrial Production : results for March show no change to previous month -0.6%. However, figure is below market consensus of -0.2%.
  2. University of Michigan Confidence: preliminary results for April show unexpected decrease of consumer confidence to 89.7. Market consensus has been at 92, while 91 is previously posted.



Below are some of the significant indicators to watch during next week:

Fundamentals 18-22 April

Very important event to watch during next week would be European Central Bank rate decision on Thursday. Markets are waiting further move from ECB, considering that current quantitative easing did not output expected results. Taking into account interest rate cut to negative area during last month, most probably we will not see move in the rates, however, any unanticipated reaction from ECB would trigger market reaction.


Euro-Zone ZEW Survey : results for April will be posted regarding economic sentiment in Europe. Previously posted indicator was 10,6. Prior to results for Euro-Zone, German ZEW Survey will be posted. There should not be any significant change in the sentiment for both indicators.

US Housing Starts : results for March will be released on a monthly basis. Previously , this indicator was standing at 5,2%.

US House Price Index: results for February will be posted on a monthly basis. Last month we have seen modest increase in housing prices of 0,5%.

Markit Eurozone Manufacturing PMI : preliminary results for April will be released. Previously index was standing at 51,6. We are not expecting any huge movements in index.



During last week currency pair breaks long term support level at 1.1350, finding new short term support at level of 1.1230.

Break from 1.1230 would lead to testing level of 1.116 .This level had also been tested during previous month.

On the resistance side, break from 1.123 would lead to long term resistance at 1.1350.

Relative Strength Index over 14-day period is currently at levels of around 50, showing no clear indication on future trend reversal.

EURUSD chart 18-22 April














EUR/USD daily graph with support and resistance lines, RSI and MA



For the next week I am bearish on USD/EUR

Main event during next week is going to be European Central Bank rate decision on Thursday, however, I am not expecting to see any rate change from ECB at this moment. However taking into consideration very weak results of QE measures imposed up to now, there is a possibility of new stimulus from ECB to be seen in the future. At this moment, I think that market is much more focused on FOMC meeting which would be held as of the end of April, and in this sense any significant market moves in the currency pair are much more likely to occur during this period.

During last week currency pair breaks long term support level at 1.1350, finding new short term support at level of 1.1230. At this moment is seems very likely to see market testing both levels again during next week. In support to this view, RSI is still moving around 50 showing no indication of future trend reversal. However break from 1.1230 would lead to next support level at 1.116, which could be tested during next week.


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