- EU and German Q1 GDP to be out this Wednesday, misses could hit the EUR hard.
- EUR/USD advanced for a second consecutive week, but no real bullish signs.
The EUR/USD pair edged higher for a second consecutive week, although the long-term bearish trend remains firmly in place, as, when compared to the previous weekly close, it is just 50 pips higher. The pair saw little action at the beginning of the week, and, in fact, gapped lower as risk aversion took over the markets, following US President Trump announcement to lift tariffs on all Chinese imports. The sour sentiment related to mounting trade tensions kept the greenback afloat throughout the week, changing course just Thursday when Trump said that a deal could be clinched as soon as 'this week' despite moving on with tariffs. Trade talks between the world's two largest economies extended into Friday, despite the new round of tariffs were launched midnight. The Chinese Commerce Ministry said that they are forced to retaliate, although no measures have been announced just yet.
European data released these last few days was generally encouraging, underpinning the common currency. Services output was upwardly revised in April, investors' confidence improved, and retail sales ticked higher. However, the European Commission downgraded growth forecasts for this year and the next, leaving inflation ones unchanged.
US data, on the other hand, was softer-than-anticipated, with PPI and CPI missing the market's expectations. Nothing to worry about, yet supporting the current 'patient' Fed's stance.
Anyway, the financial world had little to do with data, as none of the releases was a serious game changer. We are where we were for the last months. What actually played against the greenback was falling government bond yields, as on Thursday, the yield on the 10-year Treasury note falling early US session below that of the 3-month bill, inverting part of the yield curve and triggering concerns about the US economic health.
The upcoming week will be a bit more interest in terms of data, as Germany will release April inflation next Tuesday, while both, the EU and Germany will release Q1 GDP estimates on Wednesday. A miss in these numbers will surely bring back EUR sellers. EU inflation will be out Friday, but it would have a lesser impact on prices.
As for the US, action will begin Wednesday, when the country will release April Retail Sales and Industrial Production, while by the end of the week, the May preliminary Michigan Consumer Sentiment Index, foreseen at 97.7 vs. the previous 97.2.
EUR/USD technical outlook
The EUR/USD pair is trading around the 61.8% retracement of the 1.1323/1.1110 decline at the end of the week, maintaining its bearish long-term stance according to the weekly chart, given that the pair is trading below all of its moving averages, and with the 20 SMA extending its decline below the 200 SMA, while the 100 SMA has lost its bullish slope. Technical indicators remain within negative levels, although still lacking directional strength.
Daily basis, The pair has recovered above a still bearish 20 DMA, while the larger ones maintain their downward slopes above the current level. The 100 DMA converges with the top of the range at 1.1320, reinforcing the relevance of the level as resistance. The Momentum indicator remains within negative levels, although heading higher, while the RSI indicator advances at around 53, suggesting that the current advance could continue in the upcoming days. Resistances come at 1.1280 and the mentioned 1.1320 level, with gains beyond this last probably anticipating another leg higher, as bears will likely give up temporarily. Supports come at the 1.1200 figure followed by 1.1155, with a break below this last favoring a retest of 1.1100, the yearly low.
EUR/USD sentiment poll
The FXStreet Forecast Poll shows that the pair is now seen advancing short term, with 54% of the polled experts going long this week. However, in the monthly perspective, bears re-take the lead, increasing to 68%, with an average target then at 1.1165. In the 3-month view, bulls regain the majority increasing to 53% as bears decrease to 40%, although with the average target at 1.1234, all of which indicates that speculative interest hardly believes the common currency has room to appreciate.
Furthermore, the Overview chart shows that the short-term moving average is bullish, but that the longer term one resumed its decline. In the longer term, the pair is seen mostly between 1.0900 and 1.1300 reaffirming the absent interest for the EUR.
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