EUR/USD Weekly Forecast – Bulls Eye $1.09 on Debt Ceiling and Inflation
It’s a busy week for the EUR. Prelim inflation numbers for May will be in focus, with manufacturing PMI numbers also needing consideration.
Prelim inflation numbers for Spain (Tues), France (Wed), and German (Wed) will move the dial. A pickup in inflationary pressure would fuel bets of a more hawkish ECB facing economic uncertainty.
Other stats include French GDP (Wed), German unemployment (Wed), and German retail sales (Thurs), which need monitoring.
However, Eurozone inflation and the manufacturing PMI numbers on Thursday will likely have more impact.
With inflation in focus, investors should also consider ECB commentary. Executive Board member Andrea Enria (Thurs) and ECB President Christine Lagarde (Wed/Thurs/) are on the calendar to speak.
Away from the economic calendar, we expect the global financial markets to react to news of US President Joe Biden and Speaker of the House Kevin McCarthy reaching a debt ceiling deal.
EUR/USD Technical Indicators
The EUR/USD needs to move through the $1.0754 pivot to target the First Major Resistance Level (R1) at $1.0800 and last week’s high of $1.08313. A return to $1.0750 would signal a bullish week. However, the US debt ceiling deal, economic indicators, and central bank commentary need to deliver EUR support to give the bulls a run at $1.09.
In the case of a breakout week, the EUR would likely test resistance at the Second Major Resistance Level (R2) at $1.0878 and resistance at $1.09. The Third Major Resistance Level (R3) sits at $1.1002.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0676 in play. In case of a data and US debt ceiling-fueled sell-off, the EUR/USD would likely test the Second Major Support Level (S2) at $1.0629 and support at $1.0600. Congress need to vote on the debt ceiling deal on Wednesday.
The Third Major Support Level (S3) sits at $1.0505.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $1.07892. The 50-day EMA fell back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.
A move through the 50-day EMA ($1.07892) and R1 ($1.0800) would give the bulls a run at the 100-day ($1.08424) and 200-day ($1.08731) EMAs and R2 ($1.0878).
However, failure to move through the 50-day EMA ($1.07892) would leave S1 ($1.0676) and sub-$1.0650 Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.
The US Week Ahead
Consumer confidence figures for May will kickstart the week. While inflation remains sticky, labor market conditions are tight supporting sentiment. However, the US debt ceiling crisis may test confidence.
On Wednesday, JOLTs job openings will also move the dial ahead of ISM Manufacturing and initial job claims on Thursday.
While the numbers will draw interest, the US Jobs Report will have the final say on Friday, with wage growth and nonfarm payrolls being the focal points.
The chances of a 25-basis point Fed interest rate hike stood at 64.2%, according to the CME FedWatch Tool, up from 17.4% one week earlier.