EUR/USD: forecast for May 23-29
As we expected in our last week’s forecast, EUR/USD extended the downside, triggered by the weak euro zone’s data and hawkish FOMC minutes. Data on Wednesday showed the euro zone slipped back into deflation in April. Consumer prices contracted by 0.2% compared to a year ago, in line with the forecasts. The news confirms the difficulties the European Central Bank faces as it attempts to raise consumer prices.
Later on Wednesday traders were shocked by the fact that the Fed was discussing a June hike in April. As a result, EUR/USD plunged below the 1.1200 support, but has recovered some ground later in the week.
What to expect from the euro on the new week? The pair remains in a bearish channel and is expected to reach 1.1100 next week. This is the medium-term bullish trend support. The pair needs a fundamental driver coming out of the United States for a break lower.
As for the euro zone’s economic calendar, watch the May Manufacturing and Services PMI indices on Monday. ZEW Economic Sentiment index will be released on Tuesday. On Wednesday, pay attention to the German Ifo Business Climate index.