EUR/USD analysis: data this week expected to confirm the dominant bearish trend
|EUR/USD Current price: 1.1770
- Minutes from central banks´ meetings and preliminary May PMI to gather attention this week.
- US-China trade war headlines could push oil prices, equities higher this Monday.
The EUR/USD pair extended its yearly decline to 1.1749 last Friday, to close the week some 20 pips above the level, down for a fifth consecutive week. After softer-than-expected US inflation figures in the previous week which saw dollar bulls hesitate, dollar buying resumed on the back of soaring Treasury yields who clearly reflected renewed hopes of a faster tightening pace in monetary policy. Macroeconomic data released these last days confirmed what the market already knew that EU growth has continued to decelerate after peaking early in the first quarter, while mixed US figures weren't enough to change the view that the US Federal Reserve will end the year hiking rates three or four times.
The most relevant news from the weekend indicated that the US and China averted a trade war, agreeing to back off from imposing tariffs on each other and take measures to reduce the US trade deficit with China. While there were no details on the agreement, there are headlines indicating that China will increase its buying of food and energy-related goods from the US. Oil prices and equities could start the week with a strong note. In the fundamental front, the week will start with a holiday in several countries and no relevant macroeconomic headlines scheduled in the EU or the US. Later in the week, attention will focus in the May preliminary Markit PMI for the EU and the US, and the Minutes from the latest Fed and ECB's meetings.
The bearish trend in the pair is solid despite overstretched and with the pair at current levels, there's room for a test of the next relevant mid-term support at 1.1660. Some consolidation or even an upward corrective movement could be expected but technical readings in the daily chart keep favoring the downside, as the 20 DMA maintains its strong downward slope above the current level, after crossing below the larger ones, while the RSI indicator continues heading lower, despite currently being at 24. In the shorter term, and according to the 4 hours chart, the pair is developing below all of its moving averages, with the 20 SMA acting as an immediate dynamic resistance at 1.1800, and technical indicators holding flat within bearish territory, reflecting the latest consolidative range due to limited volumes at the end of the week rather than indicating downward exhaustion.
Support levels: 1.1740 1.1710 1.1660
Resistance levels: 1.1800 1.1845 1.1880
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