EUR/USD fresh 2019 low likely amid soft Eurozone data
Fawad Razaqzada May 23, 2019 8:06 AM
The euro was coming under increased pressure to break lower following the publication of further soft Eurozone data this morning, with investors also dumping stocks, government bonds and commodities amid ongoing concerns over trade wars and slowing economic activity. Meanwhile, the first day of European Parliamentary Elections has begun with polls suggesting Le Pen’s National Rally party is leading Emanuel Macron in France, serving as a reminder that (far) right-wing politics is on the rise in Europe. The EUR/USD hit its lowest level since the end of April at just below 1.1130. At the time of writing, the exchange rate was bouncing slightly off its lows, awaiting fresh impetus from the US session.
Eurozone data disappoints
There was more bad news from the Eurozone this morning, with business confidence in Germany dropping to its lowest level in more than four years in May according to a closely-watched survey, while the latest Manufacturing Purchasing Managers’ Indices (PMIs) also disappointed.
The Ifo Institute’s business climate indicator fell to 97.9 from 99.2 in April, disappointing analyst expectations and casting fresh doubt over the health of the Eurozone’s largest economy. Ifo economists pointed out that exports remained weak and business uncertainty high, and there was no recovery in sigh for the auto sector.
Meanwhile the latest German Flash Manufacturing PMI also missed the mark at 44.3 compared to 44.9 expected and 44.4 last. A reading below 50 indicates economic activity in the sector is contracting. Although French purchasing managers reported a slight improvement in the sector (50.6 vs. 50.0 last), the wider Eurozone’s manufacturing PMI remained under pressure, printing 47.7 compared to 47.9 last and 48.2 expected.
Weak global demand, political uncertainty in Europe and geopolitical risks concerning the US, China and Iran are among the factors weighing on business sentiment.
Series of lower lows and lower highs for EUR/USD…
From a technical point of view, the EUR/USD continues to drift lower with increasingly shallower retracements, suggesting the sellers are gaining control. Indeed, the slopes of both the 50- and 200-day moving averages are starting to get steeper, in a further (objective) bearish development.
After taking out a short-term trend line, the EUR/USD has today broken support around 1.1150, a level which had provided mild rebounds over the past few days. This level is now the first resistance that the bears will need to defend if we are to see a new 2019 low below 1.1111 soon (very likely in our view).
For the bearish bias to become invalidated again, we will need to see the formation of a key reversal pattern, or a break above an old swing high. Until that happens, the path of least resistance will continue to remain to the downside, even if we are to see small bounces here and there.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.