Euro Fundamental Outlook: Will Data Support EURUSD Break?

Euro (EUR) Talking Points:

• EURUSD back above 1.1300 for the first time in nearly three weeks.
• Data may prove supportive but worries remain over the strength of the Euro-Zone economy.

The DailyFX Q2EUR Forecast is available to download including our short- and medium-term look at the Euro.

Looking for a technical perspective on Euro ? Check out the Weekly EUR Technical Forecast.

Fundamental Forecast for EUR: Neutral

The single-currency is gaining strength going into the weekend, aided in part by weakness in the US dollar, and will wait until data releases mid-week until it confirms whether this trend has further to go. The most important releases of the week are on Thursday with the first look at German and Euro-Zone PMIs. The recent data has been weak with German manufacturing in particular at a 2012 low as factory activity contracts further. A rebound of these levels may add support to the recent tick higher in the Euro although it is unlikely to fuel a further advance. This week’s ECB monetary policy meeting was rather muted affair and offered the market very little in the way of any fresh guidance or opinion.

DailyFX Economic Calendar

While the currency may be seeing gains, the outlook for the EZ economy remains weak. Recent ‘sources’ reports suggest that the ECB may be willing to offer the upcoming 2-year TLTROs with negative rates, while German 2019 GDP may well be downgraded again to 0.5% from a current level of 1%. Factor in that Italian GDP for this year is now expected to be around 0.2% and the problems for growth in the single-block remain entrenched. In addition, US-EU trade tensions re-emerged this week after US President Trump threatened an additional $11.2 billion of tariffs on EU goods as part of a dispute over EU subsidies to European airline giant Airbus. The EU said that they would look at imposing tariffs on US airline manufacturer Boeing in retaliation. A fresh trade dispute with the US, coming at a time when Brexit is far from settled, may well weigh further on economic growth in the Euro-Zone.

TLTROs – The ECB’s Other Stimulus Tool.

EURSUD has taken all these negatives in its stride this week and pushed back above 1.1300 and a close above this level may well put in a short-term floor for the pair. The week will also be affected by the Easter break which will curb positioning taking and crimp volatility.

EURUSD Daily Price Chart (June 2018 – April 12, 2019)

IG Client Sentiment data show 52%% of traders are net-short EURUSD. We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests that EURUSD prices may rise further.

Traders may be interested in two of our trading guides, especially in times of volatility – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

Other Weekly Fundamental Forecast:

Australian Dollar Forecast – Australian Dollar Outlook Bearish on RBA. AUDUSD Eyes China Q1 GDP

British Pound Forecast – GBPUSD Rate Defends Bull Trend Ahead of UK CPI Amid Brexit Extension

US Dollar Forecast – US Dollar Looks to Earnings, Economic Data to Shape Growth Bets