EUR/USD analysis: bad news for the EUR, good news for the Fed
|EUR/USD Current Price: 1.1192
- ECB's Draghi mentioned a 'lingering uncertainty' as a reason behind his dovish words.
- US Trump and Chinese XI-Jinping agreed to meet within the G-20 meeting later this month.
The shared currency fell sharply this Tuesday, hit by comments from ECB's President, Mario Draghi, and disappointing macroeconomic data which gave context to Draghi's words. The leader of the European Central Bank spoke at the ECB Forum on Central Banking in Sintra and said that further interest rate cuts remain part of the central bank's tools, leaving doors opened for more stimulus, signaling that policymakers would act if inflation doesn't give signs of picking up. Following his speech, Germany released the June ZEW Economic Sentiment Indicator, which plunged to -21.1 for the country and to -20.2 for the whole Union. According to the official report, the sharp drop “coincides with an increased uncertainty regarding the future development of the global economy and substantially worsened figures for the German economy at the beginning of the second quarter.”
News indicating that Trump and Xi-Jinping agreed to meet within the next G-20 meeting underpinned risk appetite, with stocks worldwide cheering some light at the end of the tunnel in the trade war front, and the possibility of lower rates in the EU. The greenback remained strong against the EUR, this last weighed by Draghi's words.
This Wednesday, the US Federal Reserve will have its monetary policy meeting. Market participants are expecting some dovish shift in the wording, paving the way for a rate cut as soon as next July. However, Retail Sales released late last week and the relief in the trade front, may keep policymakers in 'patient' mode, which will end up benefiting the greenback even more.
The EUR/USD pair is finishing the day below the 61.8% retracement of its latest bullish run at around 1.1205, a level that was unable to recover post-Draghi. Technical readings in the 4 hours chart suggest that the decline could continue during the upcoming sessions, as the pair is now below all of its moving averages, with the 200 SMA providing a dynamic intraday resistance a few pips above the mentioned Fibonacci level, and the 20 SMA still heading south above the larger ones. Technical indicators in the mentioned chart had resumed their decline after a modest recovery, keeping their negative slopes close to oversold levels.
Support levels: 1.1180 1.1145 1.1105
Resistance levels: 1.1210 1.1250 1.1285
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