EURUSD WEEKLY OUTLOOK; OVER +1400PIPS IMMINENT

FUNDAMENTAL OUTLOOK

EUR/USD had an excellent week, breaking decisively to levels last seen in November 2011. Is 1.40 the next target? Or will the common currency take a break now? German retail sales, inflation and employment data, , consumer sentiment in France and Germany and GDP in Spain. Check out these events, on our weekly outlook. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD.

Weak Non-Farm Payrolls in the US provided the trigger needed for the big breakout. If this is what the US can do without a crisis, things will likely look worse in the following months. However, in the old continent not all is well. PMIs couldn’t maintain their recovery and dropped. German business confidence is also weaker and so is inflation. Will the ECB step up its rhetoric and try to weaken the euro?

A summary of major events during the week.

1. GfK German Consumer Climate:Tuesday, 7:00. German consumer confidence advanced to its highest level in six years reaching 7.1 in October, from 7.0 in the prior month, in line with market forecast. Strong consumer spending lifted growth in 2013, increasing confidence among consumers for the next 6 months ahead. Angela Merkel’s reelection will also boost confidence in the next reading.  A rise to 7.3 is expected now.
2. German CPI: Wednesday. German inflation was flat for the third consecutive month in September, supporting domestic consumption in Europe’s strongest economy. The yearly inflation rate reached 1.6%, in line with estimates. The low unemployment rate in Germany is also contributes to growth.
3. Spanish Flash GDP: Wednesday, 8:00. The Spanish economy came closest to expansion in the second quarter, contracting only 0.1% from a 0.5% drop in the first quarter. This is a good sign for Spanish economic growth in the second part of 2013. The reading was in line with market forecast. However domestic demand and consumer spending are still sluggish, providing little hope for a speedy recovery. Spanish economy is expected to expand 0.1%.
4. German Unemployment Change: Wednesday, 8:55. German unemployment edged up unexpectedly in September with an addition of 25,000 unemployed, after a 9,000 increase in August. However unemployment remains at the lowest level since reunification. This rise surprised analysts forecasting a 5,000 decline in the number of unemployed in September. However this rise could be a temporary slip, since domestic demand continues to strengthen boosting economic growth. A rise of 1,000 unemployed is expected now.
5. Retail PMI: Wednesday, 9:10. Retail PMI in Eurozone declined to 48.6 in September, after reaching expansion in the previous month. However the average PMI reading for Q3 (49.5) was the best since Q2 2011. The main reason for this fall was anew contraction in France following two months of growth, and an ongoing decline in Italy. German retail sales edged up at the weakest rate in four months, indicating the Eurozone retail sales were fragile in August, largely due to a reverse in France.
6. German Retail Sales: Thursday, 7:00. German retail sales climbed 0.5% in August, following a 0.2% decline in July, indicating that a recovery in Europe’s No. 1 economy is gathering pace. Economists expected a larger gain of 0.9%. Sales picked up 0.3% from a year earlier. Consumer climate is on a growth trend contributing to economic growth. Another rose of 0.5% is anticipated now.
7. French Consumer Spending: Thursday, 7:45. French consumer spending dropped in August 0.4% following a 0.4% increase in July, led by food and energy declines. Consumer spending declined 0.1% on a yearly base in August. However, durable goods gained 0.1% and household goods climbed 0.4%. Textiles also jumped 1.3% on the month. A gain of 0.2% is anticipated.
8. Italian Monthly Unemployment Rate: Thursday, 9:00. Italian Jobless Rate rose to an all-time high of 12.2% in August from a revised 12.1% in July. The reading missed predictions for a 12.0% rate. Companies are worried that the Italian economy will not exit recession and that the foreign investors may eliminate jobs to cut costs worsening the situation even further. The unemployment rate for people between the ages of 15 and 24 increased to a record high of 40.1% from 39.7% and Italian Industrial production also dropped in July, reducing hope that the two-year long recession will come to an end in the second half of 2013. A further rise to 12.4% jobless rate is expected this time.
9. CPI Flash Estimate: Thursday, 10:00. The annual rate of inflation in the euro zone declined to the lowest level in three and a half years, rising 1.1% in September, from 1.3% in the previous month, indicating the European Central Bank will continue to pouring further stimulus into the region’s fragile economy if it deems it necessary. Economists expected inflation to remain 1.3%. The CPI rate is well below the ECB’s target level of just under 2%, indicating inflation will be no obstacle to further stimulus if bank officials decide the economy requires it. Annual inflation is expected to rise 1.1%.
10. Unemployment Rate: Thursday, 10:00.  The euro zone unemployment rate remained unchanged in August, better than the rise to 12.1% forecasted by analysts, suggesting the moderate economic recovery started to impact the labor market. The euro zone has progressed in the second quarter after its longest recession badly affecting job creation. Spain and Greece were the countries with the highest unemployment levels, above 25%, and economists do not forecast significant improvement in the near term. Meanwhile, unemployment in Europe’s largest economy, stood at 5.2%, the second lowest in the euro zone after Austria which had with 4.9%. Unemployment rate is expected to decline to 12.0%.

TECHNICAL BEAM

       After recording an 8-months high, EURUSD is facing a strong reluctance to move above the technical resistance at 1.3815. Hence, we expect market to begin a bearish market with over +1400pips profit target by dropping to a technical support to complete an impulsive wave leg C at 1.2320. For the record, a complete wave leg c awaits at 1.3141 for an impulsive wave.

NOTE: Price predictions produced by FibonacciPrice&PatternTrader may be affected by unforseen events like hurricane, earth quake, flood and other natural disasters consequently changing price patterns already predicted. Hence we advice strict adherence to money management techniques.

HAPPY TRADING