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Currency Analyst since 2010

EUR/USD: forecast for October 5-11

By Elizabeth Belugina

During the past week lower-than-expected euro zone’s September inflation figures were welcome by the euro bears, as they strengthened expectations of more monetary stimulus from the European Central Bank. According to the data, the region’s annual inflation was -0.1%. The annual rate of core inflation, however, remained stable at 0.9%. 

The ECB president Mario Draghi sounded optimistic about economy saying that it has returned to ‘sustained growth’. Still, earlier Draghi had promised to do more quantitative easing than planned if inflation if inflation keeps declining. As a result, more QE from the ECB is very likely, though it is clear that the central bank is in no hurry to act.

We will hear more from Mario Draghi next week as he delivers another speech on Tuesday. Other important events in the euro area in the coming days include the meetings of the European finance ministers on Monday and Tuesday. The meetings will be devoted to the discussion of Greek bailout. Greek finance minister Euclid Tsakalotos will meet his euro zone counterparts next Monday for the first time since his country’s September 20 election. The work on the first review of the new bailout program, which must be completed by November 15, is beginning. There may be some headlines at the beginning of the next week. For now, the situation in the euro area looks rather stable that allows us to expect that even remaining under pressure the single currency will not give up easily.

US labor market data came out much weaker than expected. Weak NFP was a serious blow for the US dollar bringing the euro up to 1.1300. There is resistance line from August highs in the 1.1330 area, and a close higher is needed to confirm the way up to 1.1460 and 1.1500. In the absence of a break and if we see reversal model, we will go short on the euro targeting 1.1215 and 1.1150. Support of the 55- and 100-day MAs, which are currently a bit above 1.1100 was able to hold for a long time and will likely survive more attacks of the bears. Further support lies at 1.1015/00 (trend line support since March 2015) ahead of 1.0850/00. 

Daily EUR/USD 

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