Week Ahead More Downside for the Euro

Week Ahead: More Downside for the Euro?

This past week, markets seemingly have pushed past the number of new “adjusted” number Coronavirus cases. Although the number increased dramatically, these were cases that were under suspicion already, but could not be verified due to lack of testing equipment. Once the WHO arrived, they were able to verify these cases. Now that most of the suspected cases have been verified, China began pumping stimulus into the economy to try and get things back to “normal”. US stock indices traded to new highs this week; they don’t seem worried about contagion of the Coronavirus.

Fed’s Powell stayed the course during his Humphrey Hawkins testimony this week. Lower for longer, which made his testimony relatively uneventful.

The Euro, on the other hand, had quite and eventful week. Whether you blame it on poor data out of Europe, the unwind of the carry trade, or the Coronavirus, the Euro was under serious pressure this week. EUR/USD is down over 2% over the last 2 weeks, while EUR/JPY and EUR/GBP played catchup this week, both down .8% and 1.83%, respectively. There looks to be more downside in the Euro ahead for this week.

As far as the primary elections in the US are concerned, there are no primaries or caucuses until next Saturday, February 22^nd, when the Nevada caucuses will be held. However, candidates are gearing up for Super Tuesday on March 3^rd, when 15 primaries will be held. The race for the Democratic nomination is currently neck and neck between Bernie Sanders and Pete Buttigeg, however Michael Bloomberg will first appear on ballots on Super Tuesday. His entrance into the race is expected to disrupt the current leaderboard. There are already heated exchanges between Bloomberg and President Trump, and Bloomberg hasn’t even been on a ballot yet!

Earnings reports next week include WMT, DE, HSBC and LLOY

Expected economic highlights include:

Monday

Japan: GDP
US Holiday – President’s Day **markets closed**

Tuesday

Australia: RBA Minutes
UK: Claimant Count Change
Germany: ZEW Economic Sentiment Index
EU: ZEW Economic Sentiment Index

Wednesday

UK: Inflation Data
Canada: Inflation Data
US: Housing Starts
US: Building Permits
US: PPI
US: FOMC Minutes

Thursday

Australia: Employment Change
Germany: GKF Consumer Confidence
Germany: PPI
UK: Retail Sales
Canada: New Housing Price Index
US: Philly Fed Manufacturing
Crude Oil Inventories

Friday

Global Flash PMIs
EU: Inflation Rate
Canada: Retail Sales

Chart to Watch: Weekly EUR/USD

Source: Tradingview, City Index

EUR/USD has been in a falling wedge since the summer of 2018. In December 2019, price tried to breakout to the upside, only to fail to move higher during the last week of 2019. In 2020, price reversed course and began trading lower back inside the wedge. Often, we see that when price fails to breakout of one side of the wedge, it tries to retest the other side of the wedge. EUR/USD has currently taken out prior lows at 1.0879. First support is a gap from 2017, between 1.0775 and 1.0820. Below there is a strong cluster of support between 1.0700 and 1.0750, which includes:

The 127.2% extension from the September 2019 lows to the December 2019 highs
The bottom trendline of the falling wedge
An upward sloping trendline dating back to 2000!!

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.