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EUR/USD Forecast Mar. 30 – Apr. 3

EUR/USD continued its upside run, tackling the 1.10 level but struggling with the highs and eventually closing close to levels seen in the previous week. The upcoming week features inflation numbers and more PMIs. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.

Better than expected German manufacturing PMI helped the euro, and so did the better than expected German IFO business climate. Draghi repeated this regular messages and made an effort not to rock the boat. In the US, inflation beat expectations and so did new home sales. These and some hawkish comments halted the dollar's dive, but the greenback still suffered from some weak data, namely durable goods orders.

  1. German CPI: Monday, states report during the day, final figure at 12:00. After a big plunge in January, the consolidation of oil prices sent German CPI up 0.9% m/m. Nevertheless, Germany is not really out of the deflation zone y/y. A small rise of 0.4% is expected m/m in the preliminary number for March.
  2. Spanish Flash CPI: Monday, 7:00. The zone's fourth largest economy has seen y/y falls for long months. In February, the level of deflation softened to fall of 1.1%. The fall in Spanish prices helps its real growth amid dropping nominal output. A smaller drop in prices is on the cards now: 1% y/y.
  3. German Retail Sales: Tuesday, 6:00. The locomotive of the euro-zone enjoyed a jump of 2.9% in sales for the month of January. A small slide of 0.9% is on the cards now in this volatile yet important figure.
  4. French Consumer Spending: Tuesday, 6:45. Europe's second largest economy has seen three consecutive months of beating expectations. After a rise of 0.6% in January, a more modest rise is expected for February: 0.3%.
  5. German Unemployment Change: Tuesday, 7:55. The German locomotive has enjoyed 5 months of drops in unemployment. A big drop of 20K unemployed maintained the unemployment rate at a low 6.5%. Another small drop is expected for February, of 10K jobless.
  6. CPI Flash Estimate: Tuesday, 9:00. The euro-zone still experienced deflation in February, but less than expected at 0.3% in February. Core inflation edged up to 0.7% in the final read, providing some hope. The initial numbers for March are expected to be similar: a drop of 0.3% in headline y/y CPI and a rise of 0.6% in core CPI. Expectations may change after the German numbers are released.
  7. Unemployment Rate: Tuesday, 9:00. The unemployment rate in the euro-zone began dropping in recent months after being stuck for too long at 11.5%. After 11.2% reported in January, the same number is predicted for February.
  8. Manufacturing PMIs: Wednesday: Spain at 7:15, Italy at 7:45 and the final all euro-zone number at 8:00. Spain has seen its manufacturing PMI fall to 54.2 points, still indicating OK growth. It could tick up for March. Italy enjoyed stronger growth with 51.9 points, and another advance is likely now. According to the preliminary numbers for March, the all euro-zone figure rose to 51.9 points, mostly thanks to German strength. This will probably be confirmed now.
  9. ECB Meeting Minutes: Thursday, 11:30. In its March meeting, Draghi reaffirmed the commitment to QE and weighed on the euro despite raising forecasts. This complication means that the meeting minutes from the event, released for the second time, will probably be very interesting. Have the German members objected the implementation of QE?

* All times are GMT