EUR & CHF Weekly Forecast – Eyes on EU Recovery Fund Talks & PMI Figures

Even with only a few reports on deck, it could still be an exciting week for the euro and franc as other catalysts could steal the show.

Here’s what traders are likely to keep close tabs on:

EU Economic Summit

The pow-wow among EU leaders already started late last week and is scheduled to carry on until early this week
So far, officials had been unable to reach an agreement on the size and composition of the 750 billion EUR EU Recovery Fund
Word through the forex grapevine is that there has been a lot of debate on the allocation of funds but that hardliners are conceding to 390 billion EUR being given as grants
A more solid agreement could mean gains for the shared currency as it would outline the region’s plans to bounce back from the pandemic

These leading indicators are based on a survey of purchasing managers in their respective industries
Above 50 indicates industry expansion, below 50 reflects contraction
French flash services PMI to climb from 50.7 to 52.3 to signal stronger growth
French flash manufacturing PMI to rise from 52.3 to 53.2
German flash manufacturing PMI to increase from 45.2 to 48.0 to reflect slower contraction
German flash services PMI to improve from 47.3 to 50.2, indicating a shift from contraction to growth
Eurozone flash manufacturing PMI to climb from 47.4 to 49.0
Eurozone flash services PMI to rise from 48.3 to 51.0
Stronger than expected actual results could be bullish for the euro while disappointing readings could spur losses

Traders continue to keep close tabs on the COVID-19 situation all over the globe, with second wave fears limiting appetite for risk
Several nations and U.S. states are reporting a fresh surge in confirmed cases, prompting some reversals of reopenings
Business surveys from the major economies can also influence the demand for these lower-yielding currencies as these give hints on the pace of economic activity after strict lockdown measures
Earnings reports of key U.S. companies may also influence safe-haven demand if hits or misses are notable

Stochastic suggests that most euro pairs are looking bearish in the overbought territory

In particular, EUR/USD and EUR/JPY seem to be the most bearish of the bunch
As for CHF pairs, moving averages are painting a mixed picture, with more pairs in the bullish region