EUR/USD Forecast Jan. 15-19, 2018

EUR/USD dropped to lower ground but recovered nicely in a week that saw more volatility than the prior week. Final inflation figures stand out in the week before the ECB decision. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

The ECB meeting minutes delivered more action than usual: the document detailing the December meeting included a hint that the ECB may change its guidance about QE, perhaps pre-announcing the end of bond-buying already in the January meeting. This sent the euro higher. Apart from that, investor confidence, retail sales, and industrial production all beat expectations with only a few misses. In the US, the greenback suffered from worries that China will slow or halt buying of US treasuries. The half-denial from the Chinese authorities only partially helped the greenback. US inflation remains not-so-great. The technical behavior of EUR/USD was quite good.

Updates:

EUR/USD daily chart with support and resistance lines on it.

Trade Balance: Monday, 10:00. The euro-zone enjoys a wide trade surplus thanks to Germany’s robust exports. This surplus stood at 19 billion euros in October and could rise now, as we already know that Germany saw a wider surplus in November and despite France’s wider deficit.

German Final CPI: Tuesday, 7:00. The initial read for December showed a monthly rise of 0.6% in prices in Europe’s largest economy. The final read will likely confirm the initial read.

CPI (Final): Wednesday, 10:00. The flash estimate of euro-zone CPI showed an OK figure on the headline: 1.4% y/y, in line with expectations. However, core inflation remained at 0.9%, below 1%, for the third consecutive month, showing that underlying inflation is still poor. The final read will likely confirm the initial estimate.

Jens Weidmann speaks Thursday, 8:!5. The president of the German Bundesbank will make another public appearance. Will he provide a hint about an announcement about the end of QE? We know that he is a hawk, so making dovish remarks could have a bigger impact than hawkish ones. Nevertheless, his words could move markets.

German PPI: Friday, 10:00. Producer prices missed in November by rising by only 0.1%, breaking a streak of figures coming out ahead of forecasts. Inflation in the pipeline, as reflected by PPI, still seems stronger than CPI.

Current Account: Friday, 10:00. Similar to the narrower trade balance figure, the wider current account measure is in a significant surplus. The figure for October was relatively low, with 30.3 billion, a miss on estimates. We could see a higher number in the read for November.