EUR/USD remains pressured amid euro turmoil and ahead of key US data
James Chen, CMT May 30, 2018 4:53 PM
As market jitters over Italy’s political turmoil partially subsided on Wednesday, both the euro and key global equity markets gained some respite from the previous day’s heavy pressures.
As market jitters over Italy’s political turmoil partially subsided on Wednesday, both the euro and key global equity markets gained some respite from the previous day’s heavy pressures. EUR/USD bounced sharply off Tuesday’s new 10-month low of 1.1513 after reports surfaced that the two political parties currently at the center of Italian political focus would make another attempt at forming a coalition government. Coalition talks had failed over the past weekend, raising the specter of new elections and a potential extension of political uncertainty both in Italy and in the euro area as a whole. Any success in forming a coalition between the two anti-establishment parties would avoid both the need for a new election and the uncertainty that would accompany it.
While revived attempts at coalition talks indeed provided respite for the euro on Wednesday, the shared currency’s short-term fate will be determined largely by the success of those talks. Meanwhile, the other side of the EUR/USD currency pair, the US dollar, will be strongly impacted this week by key data releases out of the US. On Wednesday, two major data releases came out worse than expected. ADP private payrolls for May increased by 178,000 jobs, less than the 190,000 expected. US preliminary GDP for the first quarter came in at 2.2% (annualized) against prior expectations of 2.3%. Looking forward, Friday brings the highly anticipated US jobs report for May. Headline non-farm payrolls are expected at around 190,000 jobs added, after the previous month’s moderately disappointing 164,000. In terms of wage growth, average hourly earnings are expected at +0.3% after the previous month’s disappointing +0.1%. The unemployment rate is expected to come in unchanged at a low 3.9%. US ISM manufacturing PMI (58.2 expected) is also scheduled for release on Friday, after the jobs report.
Amid the continued specter of Italian debt and political turmoil as well as the noted data releases out of the US, EUR/USD remains entrenched in a sharp downtrend for the time being. The latest tumble saw the currency pair breakdown below the key 1.1600 area on Tuesday before rebounding back above that level on Wednesday. With any return of market concerns over Italy-driven destabilization of the eurozone and/or strong US data this week that potentially results in a rebound for the US dollar, EUR/USD could be poised to extend its entrenched downtrend that has been in place since mid-April. Any such continuation of the EUR/USD slide below 1.1600 could then target the next major support area to the downside around the 1.1300 handle.
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.