Near recent lows, the EUR/USD regains some stability.
In May, EMU’s Industrial Production fell by 1.0 percent.
The focus of the markets is still on Powell’s testimony.
The single currency is unable to find a direction, causing EUR/USD to remain near recent lows near 1.1780.
Following a dramatic selloff to sub-1.1800 levels on Tuesday, EUR/USD is now expected to attract dip-buyers and retake the 1.1800 barrier, at least initially, amid cautious sentiment ahead of Powell’s semiannual testimony to Congress.
On Tuesday, the spot dropped about a penny as US inflation numbers for June surprised to the upside, with headline consumer prices rising 5.4 percent YoY (the highest since 2008) and the core CPI rising 4.5 percent YoY. (highest since 1991).
Furthermore, notwithstanding the ECB’s stance, pressure for an earlier-than-expected tapering of the US QE program continues to mount (as evidenced by recent Fedspeak and data). On the latter, De Guindos of the European Central Bank stated earlier this week that the ECB’s forward guidance will be discussed by the Council next week. It’s worth noting that the ECB meeting is scheduled for July 22.
Industrial Production in the broader Euroland decreased 1.0 percent MoM in May and grew at an annualized rate of 20.5 percent, both figures falling short of expectations. Furthermore, the final Spanish CPI increased 0.5 percent month over month in June and 2.7 percent year over year.
The EUR/USD pair is now trading near 1.1780, slightly above the important 2020-2021 support line. In the meanwhile, price movement around spot is expected to be dominated by dollar dynamics, as investors respond to the Fed’s hawkish message, expectations of greater inflation in the US, and the possibility of QE ending earlier than planned. On the euro side of the equation, recent data suggests that support for the European currency in the form of positive results from fundamentals in the bloc has waned, though investor confidence remains high amid persistent optimism about a strong rebound in economic activity in the second half of the year.
This week’s major events in the eurozone include: Final June CPI for EMU (Friday).
On the back boiler, there are a number of important considerations to consider: In the region, there has been an asymmetric economic recovery. The rate of increase in inflation is likely to continue. The Delta version of the coronavirus is progressing, as is the vaccine campaign’s pace. Political effervescence around the EU Recovery Fund is likely. Elections in Germany. In the aftermath of the pandemic, investors have shifted their focus to European equities.
So far, spot is up 0.06 percent at 1.1782, with a breach below 1.1771 (monthly low July 14) aiming for 1.1762 (78.6 percent Fibo of the November-January rise) and a route to 1.1704 if it breaks below 1.1771 (monthly low July 14). (2021 low Mar.31). The next up barrier, on the other hand, appears at 1.1895 (weekly high July 6), followed by 1.1975 (weekly high June 25), and finally 1.2001. (200-day SMA)./n
