EUR/USD: Euro Under Pressure
Yuri Papshev | Jun 26, 2017 10:06
The index of economic expectations in Germany in June was 106.8 (forecast was 106.4), the German business sentiment index in June was 115.1 (forecast was 114.4), the current conditions in Germany in June 124.1 (forecast Was 123.3). Such data from Ifo were published today at the beginning of the European trading session. Nevertheless, positive data did not have a noticeable impact on the euro.
Moreover, after the publication of these positive data, the pair EUR/USD is declining. Investors are waiting for data from the eurozone on inflation, which will be published later on Friday.
According to economists' expectations, annual inflation slowed in June in Italy, Spain, France, Germany and the whole eurozone to 1.2% from 1.4% in May, reaching the lowest level in 2017. If the forecast is justified, then the ECB's predilection to reduce the QE program will be further reduced by market participants, despite recent positive macroeconomic data for the eurozone.
At the same time, the US continues to receive weaker data than expected macro data.
So, published on Friday, the indicators of activity in the manufacturing and services sectors of the US, calculated by IHS Markit, in June decreased. The preliminary index of supply managers (PMI) for the US manufacturing sector in June fell to 52.1 against 52.7 in May, reaching a 9-month low. The preliminary index of supply managers (PMI) for the US service sector fell to a 3-month low, reaching 53 versus 53.6 in May. It seems that there is a downward trend.
The latest inflation indicators were also below expectations and questioned the likelihood of a further tightening of monetary policy in the US. Given the recent data, the Fed may take a wait-and-see position to understand how the macroeconomic situation will develop in the coming months.
So, Fed President St. Louis James Bullard on Friday said that the Fed could take a pause in tightening the policy, noting that:
The recently published inflation data presented a negative surprise and made it doubtful that the target inflation rate would be reached.
Today, there is a multi-directional dynamics of the dollar in the foreign exchange market. The EUR/USD remains under pressure below the key resistance levels of 1.1280 (Fibonacci retracement of 23.8% of corrective growth from the lows reached in February 2015 in the last wave of global decline from 1.3900), 1.1340 (144-period moving average on the weekly chart).
Technical indicators on the 1-hour, 4-hour, weekly charts are deployed to short positions.
In the event of a breakdown of the short-term support level 1.1175 (200-period moving average and the bottom line of the rising channel on the 1-hour chart), the EUR/USD pair will continue to decline.
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The nearest targets are support levels 1.1160 (144-period moving average on the 4-hour chart), 1.1128 (200-period moving average on the 4-hour chart).
The breakdown of the support level 1.1128 will accelerate the fall of the EUR/USD pair. Medium-term target – is support level 1.0920 (144-period and 200-period moving averages on the daily chart).
Support levels: 1.1175, 1.1160, 1.1128, 1.1080, 1.1000, 1.0950, 1.0920
Resistance levels: 1.1230, 1.1280, 1.1340, 1.1600
Trading recommendations
Sell Stop 1.1170. Stop-Loss 1.1205. Take-Profit 1.1160, 1.1128, 1.1080, 1.1000, 1.0950, 1.0920
Buy Stop 1.1205. Stop-Loss 1.1170. Take-Profit 1.1230, 1.1280, 1.1340, 1.1600
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