The euro moved in a zig-zag fashion against the greenback yesterday in the session as the eurozone data did not meet analysts’ expectations. There were also rumors of postponement of a rate cut by the European Central Bank. The resumption of talks between the US and China have also turned the greenback bullish. After opening at 1.1287 yesterday, the EUR/USD pair hit a low of 1.1275, reversed trend to reach a high of 1.1322, and finally declined again to trade near 1.1285.
The currency pair opened with a bearish note yesterday, in continuation of Monday’s trend. However, rumors of postponement of a rate cut by the ECB sparked a reversal in the currency pair. The story was that the ECB would not cut rates in the monitory policy meeting to be held in July. The money market now gives only a 50% chance for a ten basis points rate cut this month.
However, the market gives a 100% chance for a rate cut in the September policy meeting. Rate cut makes a currency unattractive to investors. Therefore, rumors of postponement of rate cut propelled the euro. The common currency was unable to consolidate the gains due to weak German retail sales data.
The Federal Statistics Office stated that the retail sales contracted 0.6% m-o-m in May, compared with a 1% contraction in the earlier month. Economists had anticipated the retails sales to grow 0.5% in the reported period. Notably, a survey published last week indicated a decline in German consumer sentiment.
Likewise, the Eurostat also reported a 0.1% m-o-m decline in the Eurozone produce price index in May, compared with the 0.3% decline posted in the earlier month. Analysts had anticipated the PPI to increase by 0.1%
The weak economic data did not help the euro to consolidate its ground against the greenback, the outcome of the meeting of top EU leaders to select executives for top posts also did not evoke any positive response from the market. The EU nominated Christine Lagarde, IMF’s managing director, to replace the current President Mario Draghi at the ECB. Interestingly, Draghi will move to the IMF. The weak economic data is anticipated to keep the euro bearish in the short-term.
The greenback, on the contrary, is buoyed by expectations of an amicable solution to the US-China trade and intellectual property related issues.
Technically, the EUR/USD pair has broken the support at 1.1310. The next major support exists at 1.1215. Furthermore, the stochastic oscillator is in the bearish zone. Therefore, we are anticipating the currency pair to move down 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.
