EUR/USD had a rough week, dropping close to 1%. There are five events on the calendar this week, including eurozone inflation. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

The manufacturing sector remains a bright spot, as PMIs pointed to accelerated growth in Germany, France, and the eurozone. German Manufacturing PMI stood at with a sharp reading of 66.6, up from 60.4 previously. Services PMIs also improved, but the readings for the eurozone and France remained below the 50-level, which indicates contraction. Germany managed to nose into expansionary territory with a read of 50.8.

German consumer confidence remains in negative territory, but improved to -6.2,  marking a five-month high. The week wrapped up with German business confidence, which jumped to 96.6 in March, up from 92.4 beforehand. This indicator is currently at its highest level since June 2019.

In the US, Fed Chair Yellen and Treasury Secretary testified before Congress, with the duo reiterating a dovish stance. Yellen spoke about the follow-up stimulus, which she said will be paid by higher taxes. Powell acknowledged that inflation would likely increase, but that it would be temporary, and that the Fed would not raise interest rates.

Durable goods disappointed with a sharp decline of 1.1%, its first decline since April. GDP for Q4 of 2020 was revised upwards from 4.1% to 4.3%. As well, unemployment claims fell to 684 thousand, marking a one-year low.

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

1. German Prelim CPI: Monday, 9:00. This key inflation gauge ticked lower to 0.7% in February, down from 0.8% beforehand. The downturn is expected to continue in March, with a forecast of 0.5%.
2. French Consumer Spending: Wednesday, 8:45. Consumer spending declined by 4.6% in January, worse than the estimate of 3.5%. The forecast for February stands at 0.7%.
3. Inflation Report: Wednesday, 10:00.  Eurozone headline inflation was unchanged in January at 0.9%. Core CPI took a dip, slowing from 1.4% to 1.1%. The estimate for February stands at 1.3% for headline CPI and 1.1% for the core reading.
4. German Retail Sales: Thursday, 7:00. Retail Sales has contracted over two straight months, pointing to a slump in consumer spending in the eurozone’s largest economy. However, a strong rebound is expected in February, with an estimate of 2.0%.
5. Manufacturing PMIs: Wednesday, 8:50 in France, 8:55 in Germany, and 9:00 for the whole eurozone. The German and Eurozone Manufacturing PMIs continue to show robust growth in manufacturing. The second-estimate PMIs are expected to confirm the initial readings, with readings of 66.6 and 62.4, respectively. France, Spain, and Italy are all projected to post readings above the 50-level, which separates contraction from expansion.

EUR/USD Technical Analysis

Technical lines from top to bottom:

• We start with resistance at 1.2038.
• 1.1936 (mentioned last week) is next.
• 1.1808 is an immediate resistance line.
• 1.1709 is the first line of support.
• 1.1538 is a 50% Retracement From the 52 Week High/Low.

I Remain Bearish on EUR/USD

The eurozone economy remains weak, and the EU continues to grapple with a listless vaccine rollout and further lockdowns. The US recovery has been deepening, which bodes well for the dollar. The euro has lost 2.2% of its value in March, and the downward swing could very well continue.