The Eurodollar declined against the greenback in the European session yesterday following the report of an unexpected decline in German GfK consumer sentiment data. The euro sell-off intensified in the US session with the release lower than anticipated increase in the wholesale inventories in June. Overall, the EUR/USD pair declined from a high of 1.1830 to a low of 1.1790.
As per data provided by GfK, German consumer sentiment is expected to decline by -0.3 points in August, unaltered from the decrease of -0.3 point forecast for July. The projected reading surprised the market, which was anticipating the leading indicator to increase by 0.90 points in August.
With respect to July, Rolf Bürkl, a GfK consumer expert, opined as follows: “The phase where the decrease of COVID-19 incidence of infection has come to an end, and those figures are again on the rise. […]. Despite the current stagnation of consumer confidence, the domestic economy will make a positive contribution to overall economic development in the second half of the year.”
After hitting a decade high last month, economy-related anticipations were slightly moderate in July, with the indicator declining 3.80 points to 54.60. Still, the indicator’s reading is very high as the economic outlook index is 44 points above the reading for the comparable period last year. Similar to the economic index, the income expectations index posted a drop of 5.10 points to 29, but still 10 points higher than the prior year’s comparable period.
On the contrary, the inclination to purchase is improving moderately. The indicator recorded an increase of 1.40 points to 14.80. Compared with the similar period last year, consumption propensity has decreased by roughly 28 points.
In the US session, the Census Bureau stated that the goods trade deficit widened to $91.20 billion in June, the second-highest level on record, from $88.10 billion in May. Economists had anticipated narrowing of the goods trade deficit to $88 billion.
The value of goods exported from the US was $145.50 billion in June, an increase of $0.50 billion from May. Likewise, the value of goods imports into the US was $236.70 billion in June, up $3.50 billion from May.
Exports were led by a 2.20% growth in industrial supplies, 1.70% increase in automotive vehicles, and 0.7% rise in consumer goods.
Imports were driven by an 8.5% growth in industrial supplies, 4% rise in foods, feeds & beverages, and 1.10% increase in capital goods.
Furthermore, as per a survey conducted by Thomson Reuters, on an annual basis, the US economy expanded at an impressive 8.50% in the second quarter, eclipsing the 6.40% growth reported in the first quarter. The forecast 2Q21 GDP growth would be the strongest since 1983.
The Census Bureau also stated that the wholesale inventories (preliminary estimates) rose by 0.8% m-o-m in June, following an increase of 1.30% in the earlier month. The reported figure was better than the 1.20% rise anticipated by economists. On a y-o-y basis, wholesale inventories increased 10.2% in June 2021. In value terms, wholesale inventories stood at $715.0 billion in June.
The June figure reflects the eleventh successive monthly gains with durable goods and non-durable goods registering a growth of 1.2% and 0.1%, respectively.
Likewise, retail inventories rose by 0.3% m-o-m in June, following a decrease of 0.8% in May. On a y-o-y basis, the retail inventories increased 3.7% in June 2021. In value terms, retail inventories were $600 billion at the end of June 2021.
The weak economic data from Germany and mixed economic data from the US are expected to keep the EUR/USD pair range-bound with a slight bearish bias.
Technically, the EUR/USD pair is declining after failing to break the resistance at 1.1830. The next minor support is anticipated only near 1.1760. The currency pair is trading below its 50-day moving average, while the MACD indicator reading has turned negative. Therefore, we are anticipating the currency pair to decline further in the days ahead.
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.
