Euro Inflation, EUR/USD Analysis
EU inflation remains stubborn, rising to 7% and the core reading eases slightly. ECB speakers likely to favor more rate hikes EUR/USD continues to decline as US debt ceiling impasse dominates sentiment. USD safe haven bid and weak Chinese data weigh on EURThe analysis in this article makes use of graphics patterns and key support and resistance levels For more information visit our complete education library
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Eurozone Inflation Rises, Core Prints Online
Inflation in the Eurozone is once again proving sticky as the final data for April showed a slight move higher in the headline press compared to April last year. Core printing, which strips out more volatile price items such as food and fuel, fell from 5.7% to 5.6%, showing a marginal improvement. However, month-on-month inflation moved in the right direction, revealing price growth of 0.6% compared to 0.9% previously, indicating that the pace of price increases may be slowing – if
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EUR/USD was trading lower after the final print, although the pair has traded lower since pressure around the US debt ceiling has increased and is fast approaching the theoretical deadline of June 1. The dollar has taken quite a bid due to its safe haven qualities as the deadline approaches. A stronger dollar will weigh on EUR/USD until there is news of collaboration and the likelihood of a deal before date x.
EUR/USD 5 minute chart
Source: TradingView, powered by Richard Snow
Another bearish influence for the pair includes, as the Fed spoke earlier this week, in response to the long-term inflation expectations of US citizens revealed through the consumer sentiment survey of the University of Michigan. However, much weaker manufacturing data from America’s East Coast shows that macroeconomic data is likely to be mixed as certain pockets of the economy such as services hold up, while manufacturing looks weak.
Weak Chinese import and export data and inflation numbers have also cast doubt on the positive economic influence the reopening was expected to have on the rest of the world. China is a major trading partner of the EU and signs of recent weakness weigh on the currency. Keep an eye out for more dovish sentiments from ECB officials throughout the day as they are likely to continue the message that a tightening remains appropriate, however, this may have little impact given the recent bearish move, but may help reduce sale
The pair has easily fallen below support levels, picking up bearish momentum in the process. Support now resides at 1.0760 with resistance (previous support) at 1.0910. The RSI suggests that there is still more room to the downside before the market looks oversold.
EUR/USD Daily Chart
Source: TradingView, powered by Richard Snow
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
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