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Euro Outlook: EUR/USD Turns to US Data After Ugly EU Forecast

Euro Outlook: EUR/USD Turns to US Data After Ugly EU Forecast

2019-11-08 08:00:00
Dimitri Zabelin, Junior Currency Analyst
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US Dollar, EUR/USD Forecast – Talking Points

  • US Dollar may rise vs Euro if US consumer confidence data beats forecasts
  • Sentiment data carries weight because consumption accounts for 70% of GDP
  • EUR/USD continues to trend lower and may aim to test key support at 1.1022

Learn how to use politicalrisk analysis in your trading strategy!

The Euro may extend its decline vs the US Dollar if consumer confidence data out of the largest economy in the world shows greater optimism than expected and subsequently leads to a capital inflow into the Greenback. Revived optimism in the consumer – the driver behind 70 percent of the US economy – could signal more buoyant spending habits in the future that could in turn help push inflation closer to the Fed’s two percent target.

For EUR/USD, a better-than-expected print may accelerate the pair’s decline following a dismal report the EU Commission published on the Eurozone’s economic future. The group cut the growth outlook to 1.1 percent from 1.2 percent, with Vice President Valdis Dombrovskis attributing it to “trade conflicts, rising geopolitical tensions,persistent weakness in the manufacturing sector and Brexit”.

This evaluation came less than 24 hours after the International Monetary Fund released its Regional Economic Outlook for Europe. The report highlighted that “weakness in trade and manufacturing could spread to other sectors—notably services—faster and to a greater extent than currently envisaged(IMF Regional Economic Outlook: Europe). External factors – ie trade wars – have been a key source behind the region’s slowdown.

Going forward, while no individual data print may not overwhelmingly cause the ECB to shift policy one way or another – that is, more hawkish or dovish – the cumulative effect of chronic underperformance and geopolitical uncertainty could be an adequate enough force to pressure the ECB to become even more accommodative. To learn more, sign up for my weekly webinar here.

EUR/USD Technical Analysis

EUR/USD is gradually approaching the 1.1022 support level which could be a significant inflection point. A break below it with follow-through may break the spirit of the bulls and lead to an aggressive selloff if it prompts traders to abandon their hopes of a meaningful recovery in EUR/USD. Looking ahead, traders will be closely watching to see if upcoming confidence data could pressure the pair to the 1.1022 support level.

Market Analysis of the Day: EUR/USD Coming Closer to Key Support Level

Chart showing EUR/USD

EUR/USD chart created using TradingView

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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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