Technical Analysis EURUSD : 2019-04-18

Commercial Content Analysts
1

Improving German investor sentiment bullish for EURUSD

German investor expectations improved more than expected. Will the EURUSD continue climbing?

Investor sentiment in euro-zone’s largest economy improved: German ZEW investor sentiment index for the country improved to 3.1 in April, up from -3.6 in March. It was better than an expected reading of 0.8. Last Friday Eurostat upgraded euro-zone’s industrial production for February, reporting a reading of just 0.2% on month decline instead of 0.5% contraction. Better investor sentiment is bullish for euro. While euro-zone struggles to overcome the negative effects of last recession, the opening of new possible trade war front after US threatened to levy tariffs on $11 billion of EU products is a downside risk for euro. Chances are US and European Union will reach a solution which will not impeded transatlantic trade.

EURUSD__O_18April2019
EURUSD__O_18April2019660×550 45.9 KB

On the daily timeframe EURUSD: D1 is retracing after it hit 5-week low in the beginning of April.

The Donchian channel indicates uptrend: it is narrowing up.
The MACD indicator is below the signal line and the gap is narrowing, which is a bullish signal.
The Parabolic indicator gives a buy signal.
The stochastic oscillator is falling but has not reached yet the oversold zone.
We believe the bullish momentum will continue after the price breaches above the upper Donchian boundary at 1.1323. A price point above that level can be used as an entry point for a pending order to buy. The stop loss can be placed below the lower Donchian bound at 1.1206. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop-loss level (1.1206) without reaching the order we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Position Buy
Buy stop Above 1.1323
Stop loss Below 1.1206

2

Weak PMI points towards 1.10.

3

I assume you mean Manufacturing PMI flash reading of 44.5 after 44.1 in March. True, it still shows contraction, albeit at slower rate than in March. If you look at euro area data updates after the techanalysis, the picture is mixed: composite PMI declined to 51.3 from 51.6 in March as manufacturing sector contraction slowed just like in Germany, while services sector expansion slowed. If manufacturing sector manages to halt the contraction (as the current trend is) and start expanding with services sector – euro will strengthen. It is a tall order though with US and EU threating to levy tariffs on mutual exports: the European Commission threatened to impose duties on US imports worth $20 billion last Wednesday following Washington’s threat it was considering tariffs on approximately $11 billion worth of EU goods. There is a chance negotiations may avert deterioration in euro-zone’s export position with US as EU excluded agricultural products from talks, but more likely EU exports will decline. So how any loss in exports to US (which is the biggest EU export market accounted for 20% of EU goods exports) may be compensated by a rise to other EU trading partners ( like second biggest partner China accounting for 11%, next Switzerland with 8% …) is a not clear… So yes, there is a big chance of euro decline.

4

Purely sentimental IMO. Outlook slightly bullish EUR, compared to less-slightly bearish USD.