EUR/USD Under Strong Downward Pressure - 22 May 2019
Since the beginning of this week's trading, ahead of the announcement of the US Federal Reserve last meeting, the EUR/USD is still under strong downward pressure, as the single European currency continues to lose confidence amid the slowing German-led Eurozone economy, with the continuation of global trade wars, most importantly The US-China trade dispute, which supported stronger gains for the US dollar as a safe haven. This situation supported the EUR/USD to the 1.1150 level at the time of writing and near-22-month low around 1.1110 which was tested at the end of last month. The Euro was not affected by the announcement of CPI figures in the Eurozone. As expected, consumer prices remained unchanged, however there was a rise in the core consumer price index, but the rate is still far from the ECB's 2.0% target. The pair is still under bearish pressure below 1.1200 psychological support.
The US dollar increased gains as investors became more driven towards it as a safe heaven, 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 stability of the pair around and below the support level 1.1200 supports the continuation of the bearish trend for the pair. The Euro did not benefit from the high inflation in the Eurozone, as the factors for this 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 correct above.
Technically: We had expected and recommended in the previous analysis for a long time to sell the pair from every ascending level. The EUR/USD is now bearish, and the nearest support for the pair are currently at 1.1165, 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.
The economic calendar today will focus on the minutes from the US Federal Reserve meeting. There are no significant European data.
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