Week Ahead: More Downside for the Euro?

Week Ahead: More Downside for the Euro?

This past week, markets seemingly have pushed past the amount of latest “adjusted” number Coronavirus cases. Although the amount increased dramatically, these were cases that were under suspicion already, but couldn't be verified thanks to lack of testing equipment. Once the WHO arrived, they were ready to verify these cases. Now that the majority of the suspected cases are verified, China began pumping stimulus into the economy to undertake and obtain 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 in the week . Lower for extended , which made his testimony relatively uneventful.

The Euro, on the opposite 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 in the week . EUR/USD is down over 2% over the last 2 weeks, while EUR/JPY and EUR/GBP played catchup in the week , both down .8% and 1.83%, respectively. There looks to be more downside within the Euro ahead for in the week . 

As far because the primary elections within the US are concerned, there are not any primaries or caucuses until next Saturday, February 22nd, when the Nevada caucuses are going to be held. However, candidates are gearing up for Super Tuesday on March 3rd, when 15 primaries are going to 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 predicted to disrupt the present 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 level 
US: Philly Fed Manufacturing
Crude Oil Inventories
Friday

Global Flash PMIs
EU: rate of inflation 
Canada: Retail Sales
EUR/USD has been during a falling wedge since the summer of 2018. In December 2019, price tried to breakout to the upside, only to fail to maneuver higher during the last week of 2019. In 2020, price reversed course and commenced trading lower back inside the wedge. Often, we see that when price fails to breakout of 1 side of the wedge, it tries to retest the opposite side of the wedge. EUR/USD has currently taken out prior lows at 1.0879. First support may be a gap from 2017, between 1.0775 and 1.0820. Below there's a robust 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!!