The euro hasn’t been spared from the dollar’s strength in last week’s trading. In fact, EURUSD closed lower every single trading day on disappointing economic reports from Europe. Will the euro be able to recover this week?
Last week, we pointed out a double top chart pattern on the daily chart of EURUSD. It now looks like that the currency pair is trading below the neckline as the dollar got stronger in Friday’s trading. Rising yields on 10-year Treasury bonds on optimism that China and the US might soon agree on tariff rollbacks sparked the dollar’s strength.
It also did not help the euro that data from France came in worse than expected. Industrial production only grew by 0.3% in September which missed expectations at 0.4%. The country’s trade balance also showed a bigger-than-expected deficit of 5.6 billion EUR when it was estimated to only be at -4.9 billion EUR. Germany’s trade balance also missed forecasts by 100 million EUR at 19.2 billion EUR.
There are only second-tier reports scheduled from Europe this week. Germany’s preliminary GDP report for the third quarter of 2019 will likely have the most impact on the euro when it is released on Thursday at 7:00am GMT. The forecast is for the report to show that the largest economy in the euro zone contracted by 0.1% last quarter.
Prior to that, the German ZEW Economic Sentiment report is anticipated to show pessimism among German investors and analysts with a -13.2 reading. The report is scheduled tomorrow at 10:00 am GMT.
As for the US dollar, inflation reports are scheduled on Wednesday at 1:30 pm GMT. The headline CPI figure is estimated at 0.3% while the core reading is at 0.2%.
The last time Fed Reserve Chairman Jerome Powell spoke, he expressed the Federal Reserve’s optimism on the economy and hinted that they would take a break from further rate cuts. A better-than-expected inflation report from the US may just push EURUSD lower to test its yearly lows at around 1.0900. However, a disappointing CPI figure may just be the catalyst that the euro needs to take a breather and keep on trading above 1.1000.More content