EUR/USD Forecast and Trade Ideas for May 20 2016

Previous trading day:

US Dollar continued bearish trend against Euro, started after release of April FOMC minutes, reaching levels of 1.12 from 1.1220 traded previously. Such move was supported by positive data on US economy released today. After unexpected jump in initial jobless claims week before, many analysts have raised concerns if US labor market is on actual recovery track, however, figure posted for last week show decrease in jobless claims of 16K from 294K posted previously, reaching 278K. In addition CB leading Economic Index increased by 0.6% in April indicating modest growth of US economy for Y2016. All major fundamentals are showing positive trend, signifying growth of US economy and potential near-future FED strengthening of monetary policy. However, as Brexit is seen as one of the risks to economic outlook, it is up to be seen whether rate increase will occur during June or decision will be postponed for July meeting.

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Moderate but gradual growth for EU economy is expected by ECB officials, as exposed in accounts of the monetary policy meeting officially published yesterday. It has been concluded that economy growth is supported by monetary measures, however, they are unable to sustain targeted inflation levels “below, but close to 2%” . This levels can be expected in the medium term, but without specifying exact time period that this medium term refer to. In addition, there has been noted possibility on inflation dipping into negative zone  again in the coming months before it revert trend, during second half of Y2016, and further through Y2017 and Y2018.

List of results released during previous day are following:

EU results 19-MayEuro-Area construction output is continuing slow down trend. March figure is for -0.9% lower from February output of -0.6%. On a yearly basis, construction output reached negative area of -0.5%, from 3.4% posted for February.

US results 19-MayUS Initial Jobless Claims dropped during previous week by 16K to 278K, from 294K previously posted. Figure is also slightly above market consensus at 275K.

Philadelphia Fed Manufacturing Index showing sentiment of manufacturers on general business conditions, unexpectedly dropped to -1.8 for May. Result is lower from previously posted -1.6, and well below market expectations at 3.5.

The Conference Board Leading Economic Index increased in April for 0.6%.  As noted by Conference Board, all components of index contributed to this increase, except consumer expectations, indicating moderate growth trend in Y2016.

Chicago Fed National Activity Index is up for 0.1 in April implying on economy growth above trend, which is positive development from -0.55 where index was standing in March.

DAY AHEAD:

EUR/USD Economic Calendar for today is following:

Fundamentals 20-MayGerman Producer Price Index will be released today both on monthly and yearly basis. In line with deflation trend in Euro-Area, German producer prices have been gradually declining since August Y2015, bringing yearly PPI to -3.1% as of February this year. PPI for March has been unchanged from February levels, while market is expecting finally to see modest trend reversal with PPI reaching 0.2% in April.

After significant increase of US existing home sales during March of 5.1% compared to month before, market is expecting increase trend to be continued, with home sales reaching 1.2% in April or 5.4m in nominal values.

Chart of day:

Chart 20-May

EUR/USD continued bearish trend today supported by further positive results for US economy, trading between levels 1.220 down to 1.119.

Currency pair is currently testing strong support levels around 1.1200. Break of 1.12 would lead to next support found at 1.113 down to 1.104 and 1.096.

On the opposite side, resistance levels are at 1.13, 1.1390 and 1.1450. Euro to Dollar Forecast

Below are presented some trading ideas for today, based on technical analysis taking into account current level of EUR/USD trend and excluding overnight open positions.

Trade idea 20-May

 

Disclamer: Above presented trading ideas represent personal view of the author and should not be treated as any sort of investment advice or trading recommendation.

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