Euro to US Dollar: Forecast for next five days
Euro to US Dollar looks like it is cycling lower after the sharp drop from the 1.1000 highs.
We still see a risk of a breakdown to fill the gap left after the jump higher following the first round of the French elections on April 23.
A break below the top of the gap at 1.0819 would probably continue down to 1.0779 and fill the gap entirely.
The pair has formed a rising channel since the start of 2017 and on the last move it shot above the upper channel line before returning back inside.
This failure to hold the break above the channel could be a sign of exhaustion and, therefore, of a reversal lower, further supporting the possibility the pair could be about to fill the gap.
On the other hand, the jump higher, which took the rate outside the channel also marked a new high, reversing the trend of peaks and troughs from bearish to bullish.
The pair has risen above the 200 and the 50-day moving averages and has also broken above a long-term trendline.
As such it is also possible the pair could continue rising too, although we would first wish to see a break above the 1.1100 level for confirmation, unlocking a target at 1.1200.
Data for the Euro
Eurozone first quarter GDP data kicks off the week on Tuesday, May 16 at 10.00 (BST), and is expected to continue to show 1.7% growth compared to Q1 in 2016 and 0.5% compared to Q4.
Eurozone data has generally trended higher recently, suggesting more of the same this week, so there is a bias in the market expecting higher, not lower results.
At the same time as the GDP release the ZEW economic sentiment survey, which asks thousands of business people questions about their views on the economy and its outlook will also be released.
ZEW is considered an important forward indicator for the Eurozone and German economy.
German sentiment is forecast to show a rise to 81.5 and 22.00 for conditions and sentiment respectively so far in May.
Eurozone inflation data for April is released on Wednesday, May 17, and is expected to show a 1.2% rise in Core CPI, a 0.4% rise in headline month-on-month and a 1.9% rise in annualized headline CPI.
Data for the Dollar
It is a relatively quiet week ahead on the hard data front for the US Dollar.
Building Permits are the first tier-one release and are scheduled to come out on Tuesday, May 16 at 13.30 (BST).
They are expected to show a rise to 1.27m in April.
Housing data has generally been strong lately, suggesting more upside on Tuesday.
Housing Starts, out at the same time, are forecast to show a rise of 1.26m from a previous result of 1.215m.
The next big after that is the Philadelphia Fed Manufacturing Index, out on Thursday at 13.30 which is expected to show a decline to 19.8 from 22.00 previously.
Other data of note is New York Manufacturing, out at 13.30 on Monday and Net flows of financial investments (Net TIC flows) at 21.00, which is forecast to show a rising surplus of inflows into USD.
The Dollar is at risk of downside as expectations of 2 or even 3 hikes in 2017 have started to shift from the reality of slightly below expectations data releases.
“There’s a serious misalignment between U.S. data, market expectations and Fed speak. Friday’s U.S. economic reports raise questions about the possibility of a rate hike in June,” said Kathy Lien in her week ahead report.