The economic calendar for the next week is not rich in significant events for the EUR/USD pair. On Tuesday, the ZEW Economic Sentiment Index for Germany will be released, but the main test for the euro will come from the preliminary PMI indices, which will be published on Friday, August 21. There are also no significant macroeconomic data expected from the US.
Traders' attention will be focused on the minutes from the July Federal Reserve meeting, which will help assess the power dynamics within the Committee and reveal details about the hawkish split that alarmed markets at the end of last month.
In addition, geopolitical issues remain on the agenda concerning US-Iran relations and the ongoing Middle Eastern conflict. Any new signals of escalation could revive demand for the greenback (at least short-term demand), while a renewal of diplomatic dialogue could strengthen the euro's position.
On Tuesday, August 18, the August ZEW Economic Sentiment Index for Germany and the Eurozone will be published. I remind you that in July, the German indicator unexpectedly rose to 26.3 points (from the previous value of 10.5 points), significantly exceeding market expectations (18.0 points). At the same time, the current situation assessment improved only to -77.6 points (after a June value of -81.0), indicating a persistent gap between weak current conditions and more optimistic expectations.
According to preliminary forecasts, the business environment sentiment index in Germany is expected to show positive dynamics again, rising to the 30-point mark in August.
As you know, this indicator reflects the expectations of several hundred financial analysts regarding the economic situation over a six-month horizon. It is considered a leading indicator of the business cycle. Although the ZEW is not a definitive indicator for the European Central Bank, its sustainable improvement will signal economic recovery, facilitating tighter rhetoric from the central bank. A weaker result (especially against such a bold, optimistic forecast) will be a negative signal for the euro, particularly if accompanied by deteriorating expectations for the Eurozone (in July, this sub-index rose from 9.5 to 23.4).
On Friday, August 21, the preliminary PMI indices of business activity in Germany, France, and the Eurozone will be released. This is one of the most significant macroeconomic indicators for the euro, as these indices allow for the assessment of the resilience of the Eurozone's economic recovery. In July, the composite PMI for the region rose to 52.0 points, from a previous value of 50.0, returning to the expansion zone for the first time since March. The situation in industry showed a particularly notable improvement: the manufacturing PMI rose to 51.9, with production showing the strongest growth since March 2022.
Now, market participants must determine whether the July improvement marked the beginning of a sustainable recovery or was merely temporary. A composite PMI value above 50 points will signal continued growth in business activity. According to preliminary forecasts, the manufacturing and services PMI indices for Germany and the Eurozone are expected to show minimal declines but remain in the expansion zone, that is, above the 50-point threshold. Such a result would also be reflected in the composite PMI index (for both Germany and the Eurozone).
Overall, if the release comes in at least at the forecast level (not to mention the "green zone"), the euro will receive significant support. According to the latest Reuters poll, most economists expect another 25-basis-point rate hike from the ECB in September, so the market will view any signs of sustainable economic growth as grounds for a more hawkish policy.
At the same time, weak PMIs could put pressure on the euro, especially if the deterioration affects both Germany and France simultaneously. It is clear that under the conditions of ongoing geopolitical uncertainty and high energy risks, the European Central Bank must avoid a situation in which an economic slowdown coincides with persistent inflationary pressure.
The minutes from the July Fed meeting will be published on Wednesday, August 19. This is perhaps the main (scheduled) event of the week for the US dollar.
I remind you that following the July meeting, the central bank maintained the interest rate at the previous level, implementing the most anticipated scenario. However, this decision was far from unanimous: three Committee members voted for a 25-basis-point rate increase. In this context, the protocol is of particular interest to EUR/USD traders, as it will allow them to assess the number of "hawkish" members within the Fed and understand which factors could shift the balance toward further policy tightening. Attention will focus on assessments of inflation risks, the labor market, and the impact of ongoing geopolitical and energy shocks on price pressure.
Here, it is essential to note that traders will view the Fed minutes in light of the weak labor market and inflation data (PCE, CPI, PPI) that were published after the July meeting. Furthermore, at the end of July, a disappointing US GDP report was released, confirming a slowdown in the American economy's growth.
In this context, softer rhetoric from Committee members could exert much stronger downward pressure on the greenback, while a potentially hawkish tone could provide support. The weak macroeconomic data released after the July meeting will intensify the "dovish" effect of the minutes, as the market will inevitably compare the Fed's position at the time of the July meeting with the already changed economic landscape.
From a technical perspective, the EUR/USD pair on the 4-hour chart is positioned at the upper line of the Bollinger Bands indicator, as well as above all the Ichimoku indicator lines (including above the Kumo cloud), which has formed a bullish "Parade of Lines" signal. On the daily chart, the pair has overcome the upper boundary of the Kumo cloud (1.1560), but has not yet established a firm position above this target. Additionally, on the D1 timeframe, the price is between the middle and upper Bollinger Band lines and above the Tenkan-sen and Kijun-sen lines.
Overall, the current picture indicates a priority for long positions during southern corrective pullbacks. The first target for the upward movement is 1.1570 (the upper line of the Bollinger Bands on the H4 timeframe). If buyers overcome this target (and establish a position above it), the next target for upward movement will be the mark of 1.1630 (the upper line of the Bollinger Bands on the D1 timeframe).
*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.
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