EUR/USD Weekly Forecast – Germany, Inflation, and the ECB in Focus

It is a busy week for the EUR/USD, with the German economy and euro area inflation likely to draw plenty of interest.

German Ifo Business Climate Index figures will be in focus on Monday ahead of the German GfK Consumer Climate Index on Wednesday. Following the latest ECB rate hike, rising interest rates and fears of a credit crunch could test sentiment and raise concerns over business investment and consumer spending.

On Thursday, German inflation figures for March will move the dial ahead of a busy Friday session.

German retail sales and German and Eurozone unemployment figures will provide direction along with the prelim euro area inflation report on Friday. Solid numbers would support another 50-basis point interest rate hike. ECB President Lagarde remains committed to bringing inflation to target.

From the ECB, the Economic Bulletin also needs consideration on Thursday.

With economic indicators on the heavier side, investors should also monitor ECB member speeches throughout the week. ECB Executive Board members Frank Elderson, Isabel Schnabel, Andrea Enria, and ECB President Christine Lagarde are due to speak.

Away from the economic calendar, banking sector-related news will also need consideration. A deepening banking crisis would weigh on the EUR/USD pair.

EUR/USD Technical Indicators

The EUR/USD needs to move through the $1.0774 pivot to target the First Major Resistance Level (R1) at $1.0898 and the previous week’s high of $1.09299. A return to $1.0850 would signal a bullish week. However, the economic indicators and the ECB must impress to support a breakout session.

In case of a breakout session, the EUR would likely test resistance at the Second Major Resistance Level (R2) at $1.0967 and resistance at $1.10. The Third Major Resistance Level (R3) sits at $1.1073.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0792 in play. In case of a risk-off fueled sell-off, the EUR/USD would likely fall through the Second Major Support Level (S2) at $1.0755 to test buyers at $1.07.

The Third Major Support Level (S3) sits at $1.0649.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The EUR/USD sits above the 50-day EMA, currently at $1.0764. The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.07464) would support a breakout from R1 ($1.0898) to give the bulls a run at R2 ($1.0967) and $1.10. However, a fall through the 50-day EMA ($1.07464) would send a bearish signal and bring the Major Support Levels into play.

The US Week Ahead

The all-important CB Consumer Confidence survey kick-starts the week on Tuesday. Rising interest rates and sticky inflation have continued to pin back a sharp pickup in consumer confidence. The banking crisis could also materially impact confidence and spending plans. On Wednesday, Fed Chair Powell warned of a likely credit crunch that could affect the US economy.

On Thursday, initial jobless claims and Q4 GDP numbers will draw interest ahead of a busy Friday session.

The Fed’s preferred core PCE Price Index, personal income, and spending numbers on Friday will wrap up the week.

Initial jobless claims at sub-200k, a pickup in the core PCE Price Index, and hotter-than-expected personal spending would question the market hope of a pause on rate hikes.