EUR/USD Weekly Forecast – Risk of Sub-$1.0750 on US Debt Crisis

On the economic data front, it is a busy week ahead for the EUR/USD.

In the first half of the week, German wholesale inflation (Mon), Eurozone industrial production (Mon), ZEW Economic Sentiment (Tues), and Eurozone GDP (Tues) will move the dial.

However, Eurozone inflation numbers (Wed) and the ECB Economic Bulletin (Thurs) will likely have more impact.

German Producer Price Index numbers wrap things up on Friday.

Other stats include Eurozone trade data (Tues) and finalized Italian inflation numbers (Tues), which should have a limited impact on the EUR.

With a busier economic calendar, investors should also consider ECB commentary.

Executive Board members Andrea Enria (Mon), Luis de Guindos (Tues/Wed/Thurs), Anneli Tuominen (Tues), Frank Elderson (Wed), Fabio Panetta (Wed), Isabel Schnabel (Fri) and ECB President Christine Lagarde (Tues/Thurs/Fri) are on the calendar to speak.

EUR/USD Technical Indicators

The EUR/USD needs to move through the $1.0917 pivot to target the First Major Resistance Level (R1) at $1.0986 and last week’s high of $1.10536. A return to $1.0950 would signal a bullish week. However, the US debt ceiling updates and ECB commentary need to deliver EUR support to give the bulls a run at $1.11.

In the case of a breakout week, the EUR would likely test resistance at the Second Major Resistance Level (R2) at $1.1123 and resistance at $1.1150. The Third Major Resistance Level (R3) sits at $1.1328.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0780 in play. In case of a central bank and US debt ceiling-fueled sell-off, the EUR/USD would likely test the Second Major Support Level (S2) at $1.0711.

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 200-day EMA, currently at $1.09384. The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 200-day EMA ($1.09384) would support a breakout from the 50-day ($1.09668) and 100-day ($1.09739) EMAs and R1 ($1.0986) to retarget $1.11.

However, failure to move through the 200-day EMA ($1.09384) would leave S1 ($1.0780) in play. A move through the 50-day EMA would send a bullish signal.

The US Week Ahead

The NY Empire State Manufacturing Index kickstarts the week. While weak numbers will test the appetite for riskier assets, retail sales numbers will impact this Tuesday.

On Thursday, US jobless claims and the Philly Fed Manufacturing Index will also need consideration.

While the stats will influence market risk sentiment, Fed chatter will likely have more impact. As central banks grapple with sticky inflation, FOMC members Kashkari (Mon), Bostic (Mon), Barkin (Mon), Williams (Tues/Fri), and Fed Chair Powell (Fri) are on the calendar to speak.