Euro Hit By Economic Downturn Fears
AETOS Capital Group | May 30, 2019 08:55
EURUSD
The euro closed lower on Wednesday, closing at 1.1136 (-31 pips) against the greenback. The shared currency suffered a setback after the ECB warned that the economic downturn, a result of the US-Sino trade war, threatens the Union's financial stability. Also, and despite far from being a big concern, the German unemployment rate jumped to 5.0% from the previous 4.9%, worse than anticipated. The tit-for-tat scenario between the US and Chinese representatives exacerbated the dismal mood, as the Chinese Foreign Minister said that the US is in no position to decide who is a currency manipulator, while, later in the day, US Secretary of State Pompeo said that the country "may or may not" get a trade deal with China.
Data released by the US disappointed, as MBA Mortgage Applications declined by 3.3% in the week ended May 24, while the Richmond Fed Manufacturing Index rose by less than anticipated, printing 5 in May vs. the expected 6, although above the previous 3. Not that the market cared much about these.
Later tonight (22:30 AEST), the US will release the first revision of the Q1 GDP, previously seen at 3.2% and now expected at 3.1%. Quarterly PCE prices will come alongside, seen unchanged from the initial estimate. The country will also release weekly unemployment claims, April Trade Balance, and Pending Home Sales.
EURUSD 4 Hour Chart
Based on the chart above, the short-term outlook for the pair favours additional declines, as, in the 4 hours chart, the pair fell further below its moving averages, with the 20 SMA accelerating south below the larger ones in the 1.1180 price zone, as technical indicators reach fresh weekly lows near oversold readings, maintaining their bearish slopes.
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GBPUSD
The cable pair fell to 1.2628 (-30 pips) against the greenback. The fall of the pound was on the back of several conservative ministers, appointed to replace PM May, remarked that a no-deal Brexit is not an option, neither is most of them desire.
The Sterling remained weak while the greenback advanced on safe-haven demand, with the absence of first-tier data releases leaving currencies in the hands of sentiment. This Thursday, BOE's Ramsden is scheduled to speak, while the country will only release the GFK Consumer Confidence Index for May, seen at -12 vs. the previous -13.
GBPUSD 4 Hour Chart
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The cable pair is poised to extend its decline, down for a third consecutive day after correcting part of its May's sharp losses, enough to erase extreme oversold conditions in the daily chart. In the 4 hours chart the pair was again capped by a directionless 20 SMA at around 1.2675, the Momentum indicator is bouncing just modestly from its daily low but still within negative level, while the RSI indicator holds around 35, all of which maintains the risk skewed to the downside.
Below the mentioned low, the next bearish target comes at 1.2580, the low from January 2, with a break below this last opening doors for a steeper slide.
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