- EUR/USD comes under pressure and drops to 1.1230.
- Fed’s Bullard ruled out a 50 bps rate cut.
- Italy’s Salvini to meet Di Maio amidst early elections rumours.
The single currency is now eroding initial gains and comes under renwed selling pressure, dragging EUR/USD to fresh daily lows in the 1.1220 region.
EUR/USD weaker on Italian politics, Fedspeak
Spot gathered extra downside pressure after FOMC’s J.Bullard surprised markets saying a 25 bps rate cut seems appropriate given the current US economic conditions, practically ruling out a larger cut at the July meeting.
In addition, extra weakness for EUR came from Italy after Lega Nord’s leader M.Salvini said he will meet coalition partner L.Di Maio from the 5-S M against rising rumours of a government crisis and the probability of snap elections.
In the docket and earlier in the session, German Producer Prices disappointed estimates during June, whereas the advanced Consumer Sentiment for the month of July is only due across the pond.
What to look for around EUR
The inability of the pair to clear the important resistance area in 1.1280/90 has encouraged sellers to return to the markets, triggering the recent test of the 1.1200 neighbourhood, where some support appears to have resurfaced. Further out, occasional bullish attempts should be seen as a short-lived against the backdrop of renewed and increasing speculations of another wave of monetary stimulus from the European Central Bank in the near term, via interest rate cuts (July/September), the resumption of the QE programme and changes in the forward guidance. Also weighing on the currency, the dovish stance from the ECB appears reinforced by the recent appointment of ex-IMF’s C.Lagarde to succeed M.Draghi. On the macro scenario, the slowdown in the region looks unremitting and it also reinforces the current accommodative attitude of the central bank.
EUR/USD levels to watch
At the moment, the pair is retreating 0.454% at 1.1225 and faces immediate contention at 1.1193 (monthly low Jul.9) followed by 1.1181 (low Jun.18) and finally 1.1106 (2019 low May 23). On the upside, a breakout of 1.1286 (high Jul.11) would target 1.1317 (200-day SMA) en route to 1.1412 (high Jun.25).
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