EUR/USD Forecast Dec. 14-18 – Streaking Euro Punches Past 1.21

EUR/USD posted another strong week as the pair punched across the 1.21 line. There are five events in the upcoming week. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

German Industrial Production shot up 3.2% in October, its strongest gain in four months. Eurozone GDP rebounded 12.5% in Q3, just shy of the forecast of 12.6%. Germany’s ZEW Economic Sentiment soared to 55.0 in November, up from 39.0 beforehand.

At its final policy meeting of the year, the ECB maintained its main interest rate at 0.00%, but implemented further easing. The bank increased its pandemic recovery fund by EUR500 billion, to a total of EUR1.85 trillion. German CPI fell by 0.8%, its fourth decline in five months.

In the US, headline and core inflation both rose slightly, from 0.0% to 0.2%. PPI was also weak, with the headlined and core releases coming in at a negligible 0.1%.

Unemployment claims surged to 853 thousand last week, up from 712 thousand. This points to weakness in the labor market, as the economy continues to struggle. The week wrapped up on a positive note, as UoM Consumer Sentiment improved to 81.4 in December, up from 77.0 beforehand.

EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

  1. Eurozone Industrial Production: Monday, 10:00. The indicator fell by 0.4% in September, the first decline in five months. However, a strong rebound is projected for October, with a consensus estimate of 1.8%.
  2. French Final CPI: Tuesday, 7:45. Inflation remains very low in the eurozone. The second-largest economy in the bloc has not posted a gain in inflation in four months. The estimate for November stands at 0.2%.
  3. PMIs: Wednesday, 8:15 in France, 8:30 in Germany, and 9:00 for the whole eurozone. German and eurozone manufacturing PMIs continue to point to expansion, with readings above the neutral 50-level. The November readings are expected to dip slightly, with readings of 56.2 and 53.0, respectively. France is expected in at 49.7, which shows stagnation. The services sector has been in contraction and little change is expected in November. The forecasts are 44.1 for Germany, 41.21 for the eurozone, and 39.1 for France.
  4. Inflation Report: Thursday, 10:00. The specter of deflation remains a major headache for eurozone policymakers. Headline inflation has fallen by 0.3% for the two past months, and an identical drop is projected in November. Core inflation has been in positive territory, and is expected to post a gain of 0.2% for a third successive month.
  5. German Ifo Business Climate: Friday, 9:00. Business confidence has been dipping, as the number one economy in the eurozone struggles with a resurgence of COVID-19. The indicator is expected to slow to 90.2 in December, down from 90.7 beforehand.
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