EUR/USD Forecast July 22-26

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EUR/USD remained stable, ignoring some euro-zone issues and enjoying some dollar weakness. Flash Manufacturing and Services PMIs and German Ifo Business Climate are the main events on our calendar. Here is an outlook on the important events to watch and an updated technical analysis for EUR/USD.

German ZEW dropped 2.2 points to 36.3, missing economists’ expectations. Weak German industrial production and foreign trade contributed to this fall. Furthermore, trouble from the east threaten to jeopardize Germany’s economic recovery; The slowdown in China, can hinder Germany’s growth prospects for the coming months. In addition, jobs figures were positive but housing was weak. The taper question remains open after Bernanke didn’t say anything new. What is the next move for the pair? Let’s start

EUR/USD daily chart with support and resistance lines on it.

  1. Consumer Confidence: Tuesday, 14:00. Euro-zone consumer sentiment edged up more than expected in June, advancing to minus 18.8 from minus 21.9 in May, the highest rise in 22 months. Despite the negative reading, this rise is another good sign that eh European economy is headed towards recovery. Another rise to -18 is expected this time.
  2. Flash Manufacturing and services PMIs: Wednesday. PMI data released last month indicates the slowdown in the euro zone economy eased in light of a 15-month-high increase in the EU manufacturing activity, rising to 48.7 from 48.3 in May. The Eurozone services sector also improved to 48.6 from 47.2 in May. German manufacturing sector declined unexpectedly to 48.7 from 49.4 in May but showed expansion in the services sector reaching 51.3. Even French factory output was better than projected with a 48.3 reading in manufacturing output compared to 46.4 in May and a rise to 46.5 in services from44.3 in the previous month. All in all, slower declines were registered across the manufacturing and services sectors. Economists see further improvement among the EU members this time: French Manufacturing-48.9, French Services-47.7, German Manufacturing-49.3, German Services-50.9, Euro-zone Manufacturing-49.4, Euro-zone-Services-48.9.
  3. Italian Retail Sales: Wednesday, 8:00. Retail sales in Italy declined 0.1% in April, following a 0.3% fall in April, a bit worse than the flat reading predicted by analysts. This was the eighth consecutive decline in purchases leading to a 2.9 % annual reduction, indicating the near-term prospects in retail sales continue to look pretty grim. A rise of 0.4% is forecast now.
  4. Spanish Unemployment Rate: Thursday, 7:00. The Euro-zone debt crisis continues to burden Spanish economy and labor market. The number of unemployed increased to 27.2% crossing the 6 million barrier in the first quarter, following 26.0% in the fourth quarter of 2012. No change is expected now. Recently, Spain reported a big drop in jobless claims, but this was mostly a “summer effect“.
  5. German Ifo Business Climate: Thursday, 8:00. German Business Confidence recovered ground for the second month in June rising to 105.9 from 105.7 in May, due to positive economic data registered in the last weeks. The rise was broadly in line with expectations. The Bundesbank said economic growth will accelerate in the second quarter. However a slowdown in China may hinder recovery. A further rise to 106.3 is anticipated.
  6. M3 Money Supply: Thursday, 8:00. The euro zone’s M3 money supply increased in line with expectations in May, rising 2.9% following a 3.2% gain in the previous month. Loans to private sector fell 1.1% annually last month, compared to expectations for a 0.9% drop, after falling 0.9% in April. An increase of 3.0% is forecasted now.
  7. Belgium NBB Business Climate: Thursday, 13:00. Belgian business confidence declined unexpectedly in June, reaching -12.8 from -12.4 in May as business leaders became more pessimistic about financial prospects in the coming months. Belgium, the euro zone’s sixth-biggest economy, marked a fourth consecutive quarter of contraction. However business leaders in the volatile trade sector, were less negative about employment and demand expectations, allowing sentiment to edge up after four months of decline. A rise to -11.2 is predicted this time.

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