- EUR/USD has been struggling to recover after upbeat US retail sales sent it down.
- ECB officials' concerns have also added to downside pressures.
- Monday's four-hour chart portrays oversold conditions that may result in a bounce.
EUR/USD has been trying to lick its wounds and recover from two blows – so far with little success – and trades around 1.1200.
The first downside pressure came from the upbeat US retail sales report. Consumers in the world's largest economy spent more than expected in May, with the all-important retail sales control group rising by 0.5%. Moreover, last month's robust data came on top of upwards revision for April. GDP growth forecasts for the second quarter have been revised upward by official and private forecasters alike – consumption is critical to the US economy.
See US Retail Sales: Reassurance for the Fed
More importantly, the upbeat data triggers a revision of the dovish expectations for Wednesday's Federal Reserve decision. Markets foresee a rate cut coming as soon as July, but the Fed is unlikely to rush to stimulate an economy which is seemingly firing on all engines.
The dollar's reaction to the figures was slow and persistent, sending EUR/USD to 1.1200 at the end of a turbulent week.
See Fed Preview: Five factors that will rock USD in a critical decision
And then came the European Central Bank.
ECB Vice President Luis de Guindos has said that the Frankfurt-based institution will act as inflation expectations are deteriorating. Benoit Coeure – another bank official which is usually restrained in his language – has said that market signs are "bleak" and that "risk may materialize."
Both ECB members spoke at the eve of the bank's annual conference at Sintra, Portugal. President Mario Draghi will deliver opening remarks later today and may touch on monetary policy. He has recently expressed concern that markets are pricing in more than a slowdown – but perhaps a change in the post-war order.
Speculation about both central banks will likely set the tone today.
EUR/USD Technical Analysis
EUR/USD is entering oversold conditions according to the Relative Strength Index on the four-hour chart – which is just below 30 at the time of writing. The dip implies a chance of a corrective rebound – at least in the short term.
Other technical indicators are bearish. The pair slipped below the 200 Simple Moving Average after losing the 100 SMA on Friday.
Initial support awaits at the round 1.1200 level which was the low point late last week. 1.1145 capped EUR/USD when it was trading at lower in late May and now turns into support. 1.1125 was a support line around that time and the 2019 low of 1.1107 is next down the line.
Looking up, 1.1225 is the daily high and the first line of resistance. 1.1270 provided support before the recent downturn and caps the pair now. 1.1290 and 1.1310 are next.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD steady below 1.0800 after US PCE meets expectations
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair barely reacted to US PCE inflation data, with the Greenback shedding some pips. Fed Chair Jerome Powell set to speak ahead of the weekly close.
GBP/USD hovers around 1.2620 in dull trading
GBP/USD trades sideways above 1.2600 amid a widespread holiday restraining action across financial markets. Investors took a long weekend ahead of critical United States employment data next week. Fed Chair Powell coming up next.
Gold price sits at all-time highs above $2,230
Gold price holds near a fresh all-time high at $2,236 in thinned trading amid the Easter Holiday. Most major world markets remain closed, although the United States published core PCE inflation, the Federal Reserve’s favorite inflation gauge.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.