EUR/USD Major Talking Points
- EUR/USD is still struggling with the 1.08 handle
- Germany’s ZEW expectations index rose for a tenth straight month
- However Jerome Powell, Eurozone growth data and US inflation numbers are all still due
- Get your hands on the Euro Q2 outlook today for exclusive insights into key market catalysts that should be on every trader's radar:
The Euro was flat to a little lower against the United States Dollar on Tuesday as the wait for some near-term key events sucks a little oxygen out of the market.
The session brought news that German economic confidence rose in May, for the tenth month straight. The closely-watched ZEW snapshot boasted an economic sentiment index reading of 47.1. That was above both the 46 expected and April’s print of 42.9. ZEW said that signs of recovery both in the eurozone and key export market China were behind the gains.
The single currency didn’t get much of a boost from this, but perhaps that’s not surprising. Federal Reserve Chair Jerome Powell will speak in the US in the European afternoon. The markets tend to avoid heroics when he’s on the roster. Then there are important Eurozone Gross Domestic Product numbers coming up on Wednesday, with perhaps the week’s star turn, US Consumer Price data, following them on.
The Euro has risen strongly against its US rival since its long slide to the lows of mid-April which, if you recall, had some analysts talking about parity for EUR/ USD once again. However, the weeks since have seen a steady return to form for the Eurozone economy, and a general improvement in global risk appetite which has supported the Euro.
However, the European Central Bank is expected to start trimming interest rates before the Federal Reserve does, with a reduction next month still on the table. It’s hard to see EUR/USD progress continuing as it has if these expectations are met.
EUR/USD Technical Analysis
EUR/USD Daily Chart Compiled Using TradingView
Near-term EUR/USD trade remains dominated by the uptrend in place since those April lows. It’s quite well established, and it’s lower bound doesn’t come in until 1.07122, well below the market.
However, the 50- and 100-day moving averages lie close together now just above it and appear to be blocking the path to a retest of the upper bound, with psychological resistance at 1.08 also bringing out the sellers.
The Euro has also re-entered the wide trading band which dominated trade between mid-January and April 12. That now offers support at February 15’s low of 1.06591.
On a longer-term view, the pair is stuck between a falling trend-line from mid-December and a rising one from early October last year. The former would appear in much more danger of a near-term test, but the pattern overall suggests a decline in overall volatility.
Looking at the fundamentals wouldn’t suggest that a near-term stronger uptrend is likely, so an break of that downtrend line should probably be viewed with some caution.
Looking for actionable trading ideas? Download our top trading opportunities guide packed with insightful tips for the second quarter!