Currency Analyst since 2010

EUR/USD: forecast for May 9-15

By Elizabeth Belugina

During the past week EUR/USD rose to 9-month high at 1.1614 before correcting down.

Strong euro is very unwelcome by the European Central Bank as it affects the region’s already low inflation and weak economic growth. Euro area’s flash GDP for Q1 is due next Friday. The European Commission cut its forecast for euro zone growth this year from 1.7% to 1.6%. Higher euro is bad for the European exports and stocks. So far, the latest increases in the ECB’s huge monetary stimulus didn’t drive the single currency down. However, there are no bullish drivers for the euro from the euro area, and the risk of more action from the ECB to weaken the currency should limit the euro’s advance. There’s also an opinion that investors from outside of Europe will sell their European assets, thus selling the euro.

Note, however, that American data doesn’t give much reason for stronger US dollar. Labor market data weren’t very bright and the prospect of the Fed’s rate this summer is under big question. Technically, declining 100-week MA at 1.1637 is a strong obstacle for the euro bulls. Weekly close below 1.1460 will confirm the bearish candle with a long upper shadow signaling a temporary top. Yet, there is little reason to expect a big decline in EUR/USD. Bearish correction should find support at 1.1300/1.1250. The bulls need to return above 1.1500 to regain power.     

Other events in European economic calendar next week include German factory orders and the Eurogroup meetings on Monday and industrial production data on Tuesday and Wednesday. 

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