EUR/USD flirting with yearly lows ahead of Eurozone inflation data on Wednesday

  • Coming up on Wednesday is the Eurozone and German inflation at 9:00 and 6:00 GMT respectively and a speech from Mario Draghi, President of the European Central Bank.
  • EUR/USD lost almost a 100 pips on Tuesday amid a strong USD demand backed by rising Treasury yields reaching multi-year highs.

The EUR/USD pair is trading at around 1.1843 down 0.70% on Tuesday.

EUR/USD fell throughout the trading day. In the early European session, the pair traded in the 1.1920 region and then fell to 1.1820 in the American session. The pair had a 50-pip rebound from the daily lows and the market is now hovering in the 1.1850 region.

Tuesday saw a strong demand in the US dollar as Treasury yields jumped to multi-year highs. The 10-year Treasury yield benchmark reached its highest level since 2011 at 3.095% while the 2-year note yield rose to 2.591% which has not been seen since 2008. Investors are dumping bonds and stocks to buy USD which is considered a less risky investment. As the Fed is expected to raise rates three to four times in 2018, investors are trying to get some USD before the price goes potentially up in value.

Wednesday will see tier-one data with the Eurozone Consumer Price Index (CPI) for April. To a lesser extent, the German CPI is also watched by investors while the Italian CPI is usually not a market mover. Additionally, the speech of Mario Draghi, President of the European Central Bank can also bring high volatility in the EUR/USD pair.

Earlier in the day, the US Retail Sales for April came in mixed but the market disregarded it and continued buying USD even after the release.

In the European session, the preliminary reading on the Eurozone Gross Domestic Product matched analysts’ expectations at 2.5% year-on-year for the first quarter while the Industrial Production came below expectations. In Germany the GDP for the first quarter in 2018 came below estimates at 0.3% versus 0.4% forecast while the German Zew Survey Economic Sentiment matched analysts expectations at -8.2 came and the Zew Survey Current Situation came above expectations at 87.4 vs. 86.2 in May. The Eurozone Zew Survey Economic Sentiment came above estimates at 2.4 versus 2 forecast in May.

EUR/USD 4-hour chart 

The medium-term trend is bearish and the next support is the 1.1822 low of the year followed by 1.1750 psychological level. To the upside, bulls will likely meet resistance at 1.1875 intraday swing high, then 1.1900 handle followed by 1.1950 supply level. The EUR/USD is trading below its 50, 100 and 200-period simple moving averages which suggests a strong downward momentum.

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