Eurusd Rise or Fall

EUR/USD made impressive gains on high hopes for a resolution in the Greek crisis. After breaking back into the previous high channel, will the pair surge over 1.30? A critical Eurogroup meeting on Monday holds the key, and later, inflation and employment figures are among the highlights. Here is an outlook for the highlights of the week and an updated technical analysis for EUR/USD.

Disagreements between the IMF and the Eurogroup over Greece’s long term targets sent the sides back to the drawing board, but they seem to be cooking something. EUR/USD already prices in a deal. However, it is important to note that the last part of the rally was also aided by positive news from Germany – a rise in business confidence. Is Europe getting its act together, or is it just some temporary optimism?

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

1. Elections in Catalonia: Sunday. The rich northeastern region of Spain called early elections after a huge demonstration calling for independence was met with no flexibility on fiscal issues from Madrid. Pro-independence parties are expected to win, and the next move will be a referendum for independence. Spain is already in a deep crisis and more political instability with a risk of losing a significant source of income could weigh on the euro-zone.
2. Eurogroup Meeting on Greece: Monday. After the previous meeting failed, there are high hopes that the a magic solution will be found to please the IMF about Greece’s debt trajectory, while not forcing euro-zone governments to accept losses. The Greek salad of lower interest rates, redistributing of ECB profits, and a buyback program for some private debt are the main ingredients that are considered. On top, some sauce of wishful thinking – picking the best case scenarios, is supposed to make everyone happy.
3. GfK German Consumer Climate: Monday, 7:00. Consumer confidence in Germany was revised up to the highest level since 2007 in October, reaching 6.3, from an upwardly revised 6.1 in the previous month. The surge occurred amid increased optimism regarding economic expectations. Domestic consumption could be the only factor to prevent Germany from sliding into recession. The same reading is expected now.
4. German Import Prices: Mon-Tue. Germany’s import price softened more than expected in September declining 0.7% after rising 1.3% in the previous month. Economists expected a 0.3% increase. A 0.5% decline is forecasted.
5. German CPI: Wednesday. Germany’s economic data continues to soften with Preliminary CPI showing a flat reading, following the same reading in the previous month. Germany’s weak data is weighing on the EU, advancing risk aversion.
6. M3 Money Supply: Wednesday, 9:00. Eurozone money in circulation grew at a slower than predicted pace in July, rising 2.7% from 2.8% in June. Economists expected the rate of growth to reach 3%. A 2.8% rise is anticipated.
7. Private Loans: Wednesday, 9:00. Loans to companies and households in the euro zone declined more than expected in September edging down 0.8% from the same month a year ago, amid worsening in the euro zone debt crisis. Analysts expected a 0.4% drop. A 0.8% decline is forecasted this time.
8.  German Unemployment Change: Thursday, 8:55. German unemployment doubled economists forecast in October by surging a seasonally adjusted 20,000 from 1,200 in September. Analysts expected a 10,000 increase.  The Bundesbank forecasted weaker economic growth in the fourth quarter amid the European debt crisis and global slowdown. A decline to 17,000 is forecasted now.
9. Retail PMI: Thursday, 9:10. Euro Zone retail sales declined more the expected in September, down by 0.2% from a 0.2% increase in August. The PMI dropped from September’s three-month high of 47.1, to 45.3 indicating the retail sector remained depressed at the start of the final quarter of 2012.
10. German Retail Sales: Friday, 7:00. Germany’s retail sales increased more than predicted in September, surging 1.5% from 0.1% increase in August, raising hopes that domestic consumption will underpin economic activity in the third quarter. The government revised down its growth forecast for next year to 1.0%, but raised the 2012 GDP outlook to 0.8%. A 0.3% decline is predicted now.
11. French Consumer Spending: Friday, 7:45. French consumer spending climbed moderately by 0.1% in September, following 0.8% drop in August. The reading was below the 0.2% increase forecasted by analysts. This small rise may indicate an increase in spending for the thirds quarter. A drop of 0.1% is forecasted now.
12.  CPI Flash Estimate: Friday, 10:00. Eurozone inflation declined in October, reaching 2.5%, in line with predictions, following 2.6% in September. Commodity prices remained relatively high as well as energy prices, maintaining inflation. A further decline to 2.4% is expected now.
13. Unemployment Rate: Friday, 10:00.  Unemployment in the euro zone edged up 11.6% in September, posting a record high reading, following 11.5% in August. The number of unemployed people in rose by 146,000 to 18.49 million. Spain, has the highest unemployment rate of 25.8%, followed by Greece at 25.1% and Portugal at 15.7%. Another increase to 11.7% is expected

by YOHAY ELAM