EURUSD WEEKLY OUTLOOK NOV 11TH-15TH; MARKET PRICE YET BULLISH AFTER SURPRISE ECB INTEREST RATE CUT

FUNDAMENTAL BEAM

EUR/USD had a second negative week, losing over 100 pips. Can it stabilize at these levels or continue falling? GDP, employment and inflation data are the main market movers for this week. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD.

The ECB cut the interest rate to 0.25% in its monthly meeting, catching markets by surprise. The weak performance of the euro states, excluding Germany and the overvalued Euro compelled the ECB to cut rates, in an attempt to spur the euro-zone economies. ECB president Mario Draghi also made it clear that he has more “artillery”. EUR/USD fell also on news from the other side of the Atlantic: both GDP and the Non-Farm Payrolls exceeded expectations. We’ll now see how bad the euro-zone situation is.

A summary of key events during the week

1. Italian Industrial Production: Monday, 9:00 Italian industrial output dropped unexpectedly for the second consecutive month in August, down 0.3%, following a 1.0% fall in the previous month. Economists expected Italian production to gain 0.6% in August. These poor readings suggest that Eurozone’s third-biggest economy is still struggling to exit recession. A rise of 0.2% is expected this time.
2. Jens Weidmann speaks: Monday, 17:00. The President of the Deutsche Bundesbank Jens Weidmann will speak in Basel, where he may talk about the Eurozone’s recovery and prospects.
3. German Final CPI: Tuesday, 7:00. German final CPI for September remained unchanged from its flash estimate reaching an annual inflation rate of 1.4%, the slowest since April. Household energy prices increased 0.6%, core CPI excluding energy costs posted a 0.1% monthly drop, reaching 1.7% annual rate. The readings were in line with market predictions. A decline of 0.2% is forecast. The fall in German inflation was one of the triggers for the rate cut.
4. Industrial Production: Wednesday, 10:00. Euro-area industrial output increased more than forecasted in August, rising 1.0% following a 1.0% dip in July, exceeding analysts’ expectations of a 0.8% expansion. Positive indicators verified that the Eurozone is on a recovery path. ECB President Mario Draghi said that the central bank will maintain interest rates at low levels for an extended period, to boost recovery. The Eurozone industrial output is expected to drop 0.2%.
5. Preliminary GDP in France, Germany, Italy and the Eurozone: Thursday. The Eurozone exited the recession in the second quarter, with the leading economies Germany and France, indicating a solid recovery for the 17 state-bloc. The Eurozone posted a 0.3% growth rate in the second quarter following 7 quarters of contraction. Germany reported strong growth of 0.7% and France showed a 0.5% expansion in the second quarter. Italy reported a 0.2% contraction following 0.5% fall in the first quarter. All in all, the euro zone’s performance in the second quarter was better than the 0.2% growth rate expected. French GDP is expected to gain 0.1%, Germany – a gain of  0.3%, and Italy a contraction of 0.2%.
6. French Non-Farm Payrolls: Thursday, 7:45. French non-farm payrolls dropped by 0.2% after a decline of 0.1% in it’s the first quarter. Service sector employment declined 0.1%, while construction employment remained 0.5% as in the first quarter. A smaller decline of 0.1% is forecast. France suffered a rating downgrade from S&P.
7. ECB Monthly Bulletin: Thursday, 9:00. The recent ECB bulletin released in October showed why the ECB decided to leave interest rate on hold. The bank expects economic growth to remain fragile and inflation subdued close to 2% over the medium term. Draghi stated that interest rates will remain low for an extended period and downside risks are expected to be resolved this year and in 2014 bringing stability to the Eurozone. We will get to see some of the insights that led to the rate cut.
8. Eurogroup Meetings: Thursday. Eurogroup meetings attended by the Eurogroup President, Finance Ministers from euro area member states, the Commissioner for economic and monetary affairs, and the President of the European Central Bank.
9. Inflation data: Friday, 10:00.  Euro zone inflation dropped in line with expectations in September, falling to 1.1% year-on-year, after posting 1.3% inflation in August. This 3.5 year low inflation reflects the weak economic recovery and modest domestic demand. Meantime, Core CPI excluding food and energy products fell 0.1% to 1.0% in September. ECB Executive Board member Peter Praet said inflation pressures in the euro zone are expected to remain subdued until the end of 2015. CPI is expected to increase 0.7% while core CPI is predicted to increase by 0.8%.
10. ECOFIN Meetings: Friday. ECOFIN meetings attended by Finance Ministers from EU member states will meet in  Vilnius and discuss the EU’s economic outlook, development of the Banking Union and other steps to ensure the financial stability of Europe, policy on improving access to finance for small and medium-sized enterprises, a global standard on the automatic exchange of tax information, and other issues.

TECHNICAL BEAM

 

   Having forecasted bullish continuation for this pair; It was however shocking to traders how further down the pair went following the decision of ECB to cut the interest rate to 0.25% in its monthly meeting, catching markets by surprise. It is from this surprise ECB  cut EURUSD broke our support level dropping more than +100 points south-west.

This week however, we expect the market price to complete the effect of the surprise release by completing a wave leg III at 1.3287. At this point point, we expect market price to retrace bullish- very likely towards our previously technical resistance.

All things being equal after necessary subjecting the market to the technical conditions, we expect bullish price target for EURUSD at 1.3821.

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