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Forex - EUR/USD weekly outlook: March 17 – 21

Published 03/16/2014, 11:39 AM
Euro pushes higher against U.S. dollar
EUR/USD
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Investing.com - The euro ended the week close to two-and-a-half year highs against the dollar on Friday, one day after European Central Bank President Mario Draghi said the strong euro was dragging down inflation in the euro area.

EUR/USD was up 0.33% to 1.3913 at the close, holding below Thursday’s peaks of 1.3966, the strongest level since October 31, 2011.

The pair was likely to find support at 1.3844, Thursday’s low and resistance at 1.3966.

The euro lost ground against the dollar and the yen on Thursday after the ECB chief said the strong euro was putting downward pressure on euro zone inflation.

Draghi said the strength of the euro was becoming increasingly relevant to the bank’s assessment of price stability, pointing to growing concerns that the appreciation of the euro could undermine the fragile recovery in the euro area.

The euro has rallied as expectations for further monetary easing by the ECB dimmed after the bank refrained from tightening policy at its meeting earlier this month, saying economic conditions did not support such a move.

Meanwhile, tensions between Russia and the West remained high ahead of Sunday's referendum in Ukraine’s Crimea region, now controlled by pro-Russian forces, on whether citizens want to join Russia.

The referendum has been condemned as "illegal" by Kiev and the West and is expected to prompt the west to impose sanctions on Russia.

Investors also remained wary after weak economic reports from China raised fresh concerns over the strength of the world’s second-largest economy. On Thursday, Chinese Premier Li Keqiang warned that the economy faced "severe challenges" in 2014.

Fears over problems in China’s financial sector also sapped risk appetite following the country’s first domestic bond default this month.

In the week ahead, investors will be looking ahead to Wednesday’s monetary policy announcement by the Federal Reserve. The bank is also to publish its economic forecasts.

The euro zone is to produce the ZEW index of German economic sentiment, and what will be closely watched data on inflation.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, March 17

The euro zone is to release data on consumer price inflation, which accounts for the majority of overall inflation.

The U.S. is to publish data on manufacturing activity in the Empire State, as well as reports on industrial production and long term securities transactions.

Tuesday, March 18

The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

The U.S. is to produce data on consumer inflation, in addition to reports on building permits and housing starts.

Wednesday, March 19

The Federal Reserve is to announce its federal funds rate and publish economic forecasts for inflation and growth. The Fed statement is to be followed by a press conference with Chair Janet Yellen.

Thursday, March 20

Germany is to release data on producer price inflation.

Political leaders and finance ministers from the European Union are to hold the first day of an economic summit in Brussels.

The U.S. is to publish the weekly report on initial jobless claims, as well as data on existing home sales and manufacturing activity in the Philadelphia region.

Friday, March 21

The euro zone is to release data on the current account.

Political leaders and finance ministers from the EU are to hold the second day of an economic summit in Brussels.

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