EUR/USD Current price: 1.1797
- Soft EU inflation and political jitters in Italy undermined the common currency.
- US Treasury yields reached fresh multi-year lows, stabilizing nearby.
The common currency had quite a bad day, hit by weak core inflation in April and political jitters in Italy, which coupled with persistent dollar's demand to send the EUR/USD pair to a fresh 2018 low of 1.1763. The 5-Star Movement and League, the two Italian parties struggling to form a coalition government, were said to be planning to ask the ECB to forgive €250 billion of Italian debt, although the news was later denied by the League’s economic spokesman. He clarified that they are proposing that debt bought under QE by the ECB does not count in countries’ debt-to-GDP ratios. European inflation came in-line with market's forecast in April, up yearly basis 0.7%, well below ECB's target of close, but below 2.0%. While some analysts believe that this low inflation is due to temporary factors, still indicates a long way ahead before ECB's tightening. US data was mixed, helping the pair correcting higher intraday, although it was unable to advance beyond the 1.1820 level and later resumed its decline. April Housing Starts unexpectedly fell by 3.7%, while Building Permits also shrunk, but by less-than-expected, declining 1.8%. Industrial Production in the same month was 0.7% up although Capacity Utilization grew by less-than-expected, printing 78.0%.
Thursday will be a quieter day in terms of macroeconomic releases, as there are no relevant readings scheduled in Europe, while the US will offer the usual weekly unemployment data and the May Philly Fed Manufacturing Survey. In the meantime, equities shrugged off Tuesday's negative tone, while Treasury yields maintained the bid tone, with the 10-year note yielding 3.10% at one point in the day.
Now trading above the 1.1800 figure, the 4 hours chart indicates that the bearish strength is still strong, as the Momentum barely pared its decline within extreme oversold levels, while the RSI is posting a modest bounce from oversold readings, as the pair is far below all of its moving averages, which present sharp bearish slopes. Still, the short-term candle formation favors an upward correction, that will hardly be enough to revert the dominant bearish trend. Below the daily low, a more relevant support comes at 1.1740, December monthly low, with a break below the level increasing chances of a continued decline toward the 1.1660 region the next relevant support.
Support levels: 1.1765 1.1740 1.1710
Resistance levels: 1.1820 1.1850 1.1880
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 treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.