NEW YORK (Forex News Now) – EURUSD rose sharply by an overall 0.5% last week in realtime forex trading as the price of oil rallied due to turmoil in the Middle East. Also benefitting the Euro was market speculation that the ECB could normalize liquidity before the end of Q2 2011.
Nevertheless, the rate started out the week on a soft note after the daily forex news reported that the G-20 had negotiated an agreement about indicators to assess global imbalances, although China insisted on leaving out foreign effective real exchange rates and currency reserves from the list. In post meeting comments, the G-20 highlighted the need for indicators to assess public debt, fiscal deficits, private savings rates and debt, and external imbalances while taking into account exchange rate, monetary and fiscal policies.
EURUSD saw its weekly high of 1.3837 on Friday in the wake of U.S. Preliminary GDP growing by just +2.8% q/q, which disappointed a market that was looking for growth of +3.3%. EURUSD then came off on profit taking to close the week at 1.3751.
Technical Outlook for EURUSD
An intraday EURUSD analysis of the rate’s price action last week shows the pair rising strongly off of a weekly low of 1.3524 seen last Monday to its Friday peak at 1.3837, before coming off to close at 1.3752.
The rate made further progress toward the key 1.3861 high of February 2nd, and it kept above the important psychological 1.3500 level throughout the week.
Furthermore, the rate continues to trade significantly above its key 200-day moving average, which now comes in at the 1.3160 level. The indicator is now displaying an increasingly positive slope, yielding a more bullish medium term outlook for EURUSD.
Also, the rate’s 14-day RSI trended higher last week and ended up at the 59 level on Friday — in the upper central part of neutral territory. This could mildly impede future upside price action early in the coming week.
Initial support for EURUSD shows in the 1.3703/23 and 1.3524/45 regions, and then below that within the key 1.3420/98 region that falls just below the psychological 1.3500 level. Below that, support shows at the 1.3395 level and at 1.3314 ahead of additional psychological support seen around the 1.3000 level.
Resistance is seen initially at 1.3785 within the broader 1.3697/1.3775 congestion region. Above that, resistance shows up on the charts at 1.3837, at 1.3861 and at 1.4043.
Top Economic Events to Watch for This Week
- U.S. Employment Data – Key U.S. employment numbers will be released this week that starts with ADP Non-Farm Employment Change due out on Wednesday where expectations are centered on +180K. Thursday offers Weekly Initial Jobless Claims, with an anticipated +390K change on the week. Friday is the undisputed highlight, as the Bureau of Labor Statistics releases its monthly Employment Report that includes Non-Farm Payrolls (+176K), the U.S. Unemployment Rate (9.1%) and Average Hourly Earnings (+0.2% m/m). Higher unemployment above the market’s consensus tends to weaken the U.S. Dollar versus the Euro.
- U.S. Pending Home Sales – The National Association of Realtors will release important information on U.S. Pending Home Sales on Monday. Expectations are currently centered on a decline of -2.2% for the month that is well below the previous month’s +2.0% rise. A result below the consensus will tend to hurt the U.S. Dollar versus the Euro.
- German and Eurozone Retail Sales – Germany will release its monthly Retail Sales data on Thursday that is expected to rise by +0.5% m/m from the -0.3% decline seen the previous month. In addition, Eurozone Retail Sales out the same day is expected to rise by +0.4% m/m from the -0.6% drop seen previously. An outcome below expectations will tend to hurt the Euro.
- U.S. ISM PMI Reports – The Institute for Supply Management will release its diffusion index based on monthly surveys of purchasing managers this week. The ISM Manufacturing PMI survey is due out on Tuesday, with the consensus centered on a slight increase to 60.9 from 60.8. ISM Non-Manufacturing PMI scheduled for release on Thursday is expected to also rise modestly to 59.7 from 59.4. Higher levels than expected tend to boost the Greenback.
- ECB Rate Decision – The European Central Bank is scheduled to release its latest Rate Decision on Thursday. The central bank is widely expected to keep its benchmark Minimum Bid Rate steady at 1.00%. The ECB leaders will hold a Press Conference afterwards, with both a prepared statement and a question and answer session that result in considerable intraday exchange rate volatility.
A reasonable euro forecast for the coming week indicates that the EURUSD rate should continue to encounter strong psychological support and buying interest at the 1.3500 level.
Nevertheless, ongoing unrest in Libya and the outcome of the key U.S. employment numbers due out this week could take EURUSD either way, especially since the release of these numbers can result in considerable short-term volatility in EURUSD.
Accordingly, purchasing a forex binary option Out-of-The-Money strangle in EURUSD ahead of the U.S. employment releases but expiring just after they come out could be used to profit from a significant breakout move in either direction with a limited risk of loss.