The euro fell against the greenback yesterday following the release of lower-than-anticipated retail trade data for May. The euro sell-off was also fueled by better-than-anticipated US JOLTS (job openings) and service PMI data. Overall, the EUR/USD pair declined from a high of 1.0275 to a low of 1.0160 in the last 24 hours.
According to the German statistical agency, Destatis, the country’s factory orders rose by 0.10% m-o-m in May, following a decline of 1.80% in the prior month. Economists had anticipated a decline in factory orders by 0.50%. The reported figure reflects the first increase in four months.
Overseas orders increased 1.30%, primarily aided by a 3.70% surge from countries in the Eurozone. Domestic orders fell by 1.50%. Orders grew 3.30% m-o-m for capital goods but fell by 3.20% for intermediate goods. Consumer goods posted a decline of 4.50%. Excluding major orders, factory orders declined 0.90%.
Companies continue to face issues in completing their orders as supply chains remain affected by the Russia-Ukraine war and interruptions caused by restrictions enforced to contain COVID-19 infections.
According to Eurostat, retail trade (volume) inched up by 0.20% m-o-m in May, following a decline of 1.40% in the prior month, but missed the 0.40% growth anticipated by economists.
The increase in the volume of retail trade was led by a 1.20% rise in non-food products. However, automotive fuels recorded a decline of 0.20%. Likewise, food, drinks, and tobacco posted a drop of 0.30%.
On a year-over-year basis, Eurozone retail sales rose by 0.20% in May 2022. Automotive fuels posted a rise of 5.60%, while non-food products recorded a rise of 2%. Food, drinks and tobacco inched up by 3.60%.
The final S&P Global US Services PMI (purchasing managers’ index) Business Activity Index declined to 52.70 in June, from 53.40 in May, and was higher than the preliminary reading of 51.60. Economists did not anticipate any change in the preliminary reading.
The reported figure reflects the weakest increase in business activity since January. Fresh orders fell for the first time in nearly two years as continued cost pressures and a gloomy economic scenario affected demand.
Notably, a further considerable increase in input prices was registered in June, even though inflation slowed down from May’s survey high. Eventually, business optimism regarding the year ahead declined to a near two-year (21-month) low.
As per Job Openings and Labor Turnover Survey (JOLTS) data published by the US Bureau of Labor Statistics, the count of job openings fell to 11.254 million in May, from 11.681 million in April, but was higher than the 11.05 million job openings anticipated by economists.
Professional and business services recorded a decrease of 325,000 jobs, while durable goods manufacturing posted a drop of 138,000 jobs. Non-durable goods manufacturing recorded a decline of 70,000 jobs.
According to the data published by the US Institute for Supply Management, the country’s services PMI inched down to 55.30 in June, from 55.90 in May, but surpassed economists’ expectations of 54.30. The decline was led by a slowdown in fresh orders, with the corresponding index dropping to 55.60, from 57.60. The employment index decreased to 47.40, from 50.20. However, the business activity index grew to 56.10, from 54.10. Notably, price pressures cooled for the second consecutive month, with the corresponding index dropping to 80.10, from 82.10.
Also, the inventory index fell to 47.50 from 51, reflecting a decline in inventories for the first time this year. Interestingly, the inventory sentiment index remains in negative territory at 46.20 in June, compared with 44.50 in May. A reading below 50 indicates contraction and vice versa. The inventory sentiment index remains in negative territory for the fourth successive month, implying that prevailing inventories are inadequate for business needs.
The mixed economic data from Europe and the upbeat economic data from the US are expected to keep the EUR/USD pair range-bound with a slight bearish bias in the short term.
The historical price chart indicates that the EUR/USD pair has broken the major support at 1.0390. The next major support is anticipated only near 1.0000. Additionally, the currency pair is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate the currency pair to remain in a downtrend in the short term.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
