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It’s a relatively busy week for the EUR. German trade data and service PMI numbers for member states and the Eurozone will move the dial on Monday. Barring a slide in Germany’s trade surplus, Italy and the Eurozone’s PMIs will likely have more impact.
Mid-week, the German economy is back in the spotlight, with factory orders and industrial production in focus. Following disappointing numbers for March, further declines would fuel recessionary fears.
Eurozone GDP numbers will wrap up the week on Thursday. However, these are finalized numbers, so investors would unlikely respond to unrevised numbers from prior estimates.
Beyond the numbers, investors should also consider ECB commentary. Executive Board members Luis de Guindos (Wed/Fri), Fabio Panetta (Wed), Edouard Fernandez-Bollo (Wed), Andrea Enria (Fri), and ECB President Christine Lagarde (Mon) are on the calendar to speak.
While the euro area economic indicators and ECB member speeches will influence, investors should track stats from China. After the weak NBS PMI numbers for May, the Caixin services PMI (Mon), trade data (Wed), and inflation (Fri) will impact market risk sentiment. Weak numbers would be a bearish price scenario.
EUR/USD Technical Indicators
The EUR/USD needs to move through the $1.0707 pivot to target the First Major Resistance Level (R1) at $1.0779. A return to $1.0750 would signal a bullish week. However, the economic indicators and central bank commentary need to deliver EUR support to give the bulls a run at $1.08.
In the case of a breakout week, the EUR would likely test the Second Major Resistance Level (R2) at $1.0851 to bring $1.09 into view. The Third Major Resistance Level (R3) sits at $1.0995.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.0635 in play. In case of a data and Fed-fueled sell-off, the EUR/USD would likely test the Second Major Support Level (S2) at $1.0563 and support at $1.0550.
The Third Major Support Level (S3) sits at $1.0419.
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 $1.07396. The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.
A move through the 50-day EMA ($1.07396) would support a breakout from R1 ($1.0779) and the 100-day EMA ($1.07857) to give the bulls a run at 200-day EMA ($1.08324) and R2 ($1.0851).
However, failure to move through the 50-day EMA ($1.07396) would leave S1 ($1.0635) and sub-$1.06 Major Support Levels in play. A move through the 50-day EMA would send a bullish signal.
The US Week Ahead
ISM Non-Manufacturing PMI numbers for May will kickstart the week. Investors will need to look beyond the headline figure, with the price, new order, and employment sub-components also needing consideration.
Other stats on Monday include factory orders and finalized S&P Global Composite and Services PMIs. However, these will likely play second fiddle to the ISM survey-based stats.
On Thursday, initial jobless claims will also draw interest. An unexpected jump in jobless claims would ease the fear of further Fed rate hikes.
Following the May Jobs Report, better-than-expected numbers would likely raise the bets on further Fed interest rate hikes, with the ISM Non-Manufacturing PMI the report of the week. However, investors will need the next set of inflation figures to fuel bets on a June move.
According to the CME FedWatch Tool, the probability of a June interest rate hike rose from 20.4% to 25.3%. One week earlier, the chance of a 25-basis point hike stood at 64.2%.
The US Jobs Report failed to drive bets on a June interest rate hike on Friday, despite the surge in hiring. Softer wage growth and an unexpected rise in the US unemployment rate poured cold water on bets on a move.
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