EUR/USD is holding lower ground below 1.0700 in the early European morning. The pair is dragged lower by a renewed uptick in the US Dollar amid a tepid risk sentiment. The mixed German Industrial Production data also adds to the weight on the pair. ECB-speak in focus.
The EUR/USD pair bottomed at 1.0663 on Tuesday and then rebounded toward 1.0700 but was unable to retake that level. The bias remains to the downside, although the Euro continues to trade sideways around the 1.0700 area. Risks are tilted to the downside as the price remains under the 20, 55 and 100-day Simple Moving Averages (SMAs). A firm recovery above 1.0800 would provide important support for the Euro.
On the 4-hour chart, the pair is trading below the 20-SMA, adding evidence of the downward bias. The Relative Strength Index (RSI) is flat, below 50, while momentum is accelerating to the downside. Above 1.0720, risks seem more balanced. The next resistance stands at 1.0745, followed by 1.0765. On the downside, a decline below 1.0665 would increase the negative pressure, exposing the monthly low at 1.0635.
The EUR/USD dropped again on Tuesday but remains trading around the 1.0700 area, on a quiet week as attention turns to next week’s central bank meetings. Cautious markets favored the US Dollar on Tuesday.
The European Central Bank (ECB) is set to raise interest rates by 25 basis points next week, and probably another hike in July. The June hike is fully priced in, and the next decision will be “data dependent”. Economic figures released on Tuesday showed retail sales in the Eurozone stalled in April, down 2.6% from a year ago, showing that consumers remain cautious. The German report weakened with April factor orders declining 0.4% MoM. The monthly ECB survey showed inflation expectations declined in April to 4.1%. On Wednesday, German industrial production data is due.
The US Dollar rose modestly across the board on Tuesday as Wall Street rose marginally. Market participants remains cautious ahead of a crucial week, amid a gloomy global outlook and higher interest rates. The Federal Reserve is in the media blackout period ahead of next week’s FOMC meeting. Some analysts warn that it is going to be a close call, with the May Consumer Price Index due next Tuesday being a key determinant.
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