EUR/USD Weekly Forecast – Return to $1.10 Hinged on US Jobs Report

It is a busy week for the EUR/USD.

On Monday, manufacturing PMI numbers from Italy and Spain and finalized manufacturing PMIs for France, Germany, and the Eurozone will be in focus. The PMI numbers from Italy and revisions to PMI numbers for Germany and the Eurozone will have more influence.

The market focus will then shift the focus to the German economy on Tuesday and Wednesday, with trade data and factory orders due out. We expect both reports to provide direction to the EUR/USD as investors look for reasons for the ECB to hit the pause button.

On Thursday, German industrial production, services PMI numbers for Italy and Spain, and finalized service and composite PMIs for France, Germany, and the Eurozone will draw interest. Barring a downward revision to the Eurozone Composite PMI, the industrial production figures should have more impact on the EUR.

With plenty of economic indicators in focus, ECB commentary will also need consideration. ECB Chief Economist Philip Lane will lecture at the University of Cyprus on Wednesday.

EUR/USD Technical Indicators

The EUR/USD needs to avoid the $1.0838 pivot to target the First Major Resistance Level (R1) at $1.0931. A move through last week’s high of $1.09262 would signal a bullish week. However, economic indicators from Germany would need to impress to support a pre-US Jobs Report breakout.

In case of a breakout week, the EUR would likely test resistance at the Second Major Resistance Level (R2) at $1.1019. The Third Major Resistance Level (R3) sits at $1.1201.

A fall through the pivot would bring the First Major Support Level (S1) at $1.0749 into play. In the case of a data-fueled sell-off, the EUR/USD would likely test support at $1.07 and the Second Major Support Level (S2) at $1.0656.

The Third Major Support Level (S3) sits at $1.0475.

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 $1.08214. The 50-day EMA pulled 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 ($1.08214) would support a breakout from R1 ($1.0931) to give the bulls a run at R2 ($1.1019). However, a fall through the 50-day EMA ($1.08214) would bring the 100-day EMA ($1.07710) and S1 ($1.0749) into play. A fall through the 50-day EMA would send a bearish signal.

The US Week Ahead

On Monday, ISM Manufacturing PMI numbers will draw interest ahead of JOLTs Job Openings on Tuesday.

While both reports will influence the dollar, ADP nonfarm employment change and ISM Non-Manufacturing PMI numbers on Wednesday should have more impact.

On Thursday, initial jobless claims will be in focus ahead of the all-important US Jobs Report on Friday. Nonfarm payroll and wage growth numbers will likely dictate the Fed’s next monetary policy move.

With investors looking for cracks in the US economy, weaker US economic indicators could fuel a flight to safety. Investors are still mindful of the threat of a Fed-fueled credit crunch.