EUR/USD Forecast Dec. 21-25 – Euro Rally Continues

EUR/USD posted another strong week, gaining 1.1% and moving close to the 1.23 line. It’s a light data calendar ahead of Christmas, with only three events on the schedule. Here is an outlook at the highlights and an updated technical analysis for EUR/USD. 

Eurozone Industrial Production rebounded in October, with a strong gain of 2.1%. German and eurozone Manufacturing PMIs improved in November and remain well into expansionary territory, with readings in the mid-50's range. The services sector remains in contraction, as the German and eurozone PMIs came in around the 47 line.

Eurozone inflation remains at very low levels. Headline CPI fell by 0.3% in October, marking a fourth straight decline. Core CPI recorded a gain of 0.2%. German Ifo Business Climate was unexpectedly strong, rising from 90.7 to 92.1. This beat the estimate of 90.2 points.

US retail sales declined in November, pointing to weak consumer spending. The headline figure came at -1.1%, while core retail sales fell by 0.9%. US PMIs remained well into expansionary territory, with Manufacturing PMI coming in at 56.5 and Services PMI at 55.3. However, the Philly Fed Manufacturing Index slowed to 11.1, down from 26.3 beforehand.

The Federal Reserve maintained its asset purchase program at the current level of $80 billion per month. In addition, the Fed provided additional guidance which can be viewed as a dovish signal. Unemployment claims were up sharply for a second straight week, rising to 885 thousand.

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

  1. Consumer Confidence: Monday, 15:00. If the economic recovery is underway in the eurozone, the consumer hasn’t received the memo. Consumer confidence has been dropping and fell to -18 in November. An identical reading is expected for December.
  2. German GfK Consumer Climate: Tuesday, 7:00. German consumer climate is also in negative territory and fell to -6.7 in November, its lowest level since June. The downturn is expected to continue, with a forecast of -8.7 in December.
  3. German Import Prices: Tuesday, 7:00. Import Prices have been steady, with readings of 0.3% for the past two months. We now await the November data.
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