EUR/USD: Another Bearish Weekly Close
So far, there has been no sign that the EUR/USD could rebound higher after testing its lowest level in two years before stabilizing around 1.1135 support at the time of writing, the bearish weekly close which is closer to its current performance. The continuation of the US-China trade war will continue to cause significant pressure on the Eurozone's economy, and the Euro will continue to decline as the war is going on. The growth of the US economy remains strong, boosting US consumer confidence to its highest level in 18 years. Pressure on the euro rose after a pessimistic view of the European Union (EU) elections’ outcome, where anti-EU parties won more seats than expected.
The results of the incoming economic data still confirm the extent of suffering to the Eurozone economy led by Germany from continuing global trade wars. The minutes of the last Federal Reserve meeting showed the desire of some bank members to raise the US interest rate, which supported more gains for the US dollar and contributed to the continuation of the downward pressure.
The bearish stability supports investors' question of the most appropriate timing for buying: this will depend on the return of confidence in the Euro and optimism about the imminent resolution of the US-China trade dispute, which increases the pressure on the Eurozone economy that depends on manufacturing and exports. Technical indicators are still confirming oversold areas and the pair is ready for a bullish correction.
The US dollar increased gains as it became more attractive to investors as a safe haven after Trump's latest threat to impose more tariffs on Chinese products worth 200 billion. China has responded by imposing tariffs on $60 billion of US imports. The Euro did not benefit from the high inflation in the Eurozone, as the factors for the rise are still temporary. The dollar gained stronger momentum with positive US job numbers, adding jobs more than expectations and a drop in unemployment to a 49-year low.
The Federal Reserve Board kept the interest rate unchanged as expected, pointing out that it is unlikely to raise or lower interest rates in the coming months amid signs of renewed economic health while at the same time inflation is still unusually low.
As we mentioned earlier, we now emphasize that the divergence of the economic situation and the monetary policy between the US and the Eurozone will remain a strong influence on any chances for the pair to achieve upward correction.
Technically: We had expected and recommended in the previous analysis for a long time to sell the pair from every ascending level. The bearish trend for the EUR/USD is now confirmed, and the nearest support levels for the pair are currently 1.1110, 1.1050 and 1.0975, respectively. On the upside side, the German-led Eurozone's negative economy weakened the correction opportunity further. The pair's current resistance levels are 1.1220, 1.1300 and 1.1380, respectively.
On the economic data front: The pair will focus on the German Retail Sales and Consumer Price Index data. From the US, The Consumer Price Index, the spending and income rate for the US citizen, the Purchasing Managers Index from Chicago and the Michigan Consumer Confidence Index.
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