Today we would take a look at the EUR/USD currency pair. The pair was previously stuck in a channel for many months, but as of the last two weeks the dollar managed to gain momentum and turn the trend bearish. This has been largely due to weak inflation from the EU and the opposite in the United States.
The euro continues to suffer amid weak statistics. Economic growth throughout the eurozone appears to be slowing down and the inflation rates are lagging behind the ECB’s forecasts. At the last ECB policy meeting it became clear that the central bank is not going to change the interest rate anytime soon due to inflation not meeting expectations. However, they are willing to start easing off their stimulus program, which is a new rhetoric from the ECB. Unless inflation data improves, we expect a continued weakness in the euro.
Meanwhile, the USD is still strong based on good economic data. Other than stellar Treasury yields, the US economy also boasts a GDP for the first quarter of 2018 that exceeded expectations. Moreover, the improved relations between North and South Korea bode well for Trump’s upcoming meeting with Kim Jong-un, which has helped shake off some of the political tension involving the United States. There is also another rate increases expected in the next few weeks, so we are optimistic about the dollar’s potential for growth.
In terms of the daily chart, today we have a pivot point for the pair located at 1.1974. We expect the EUR/USD to continue its decline, so look towards the nearby support levels at 1.1916 and 1.1880. If the pair starts gaining again, be aware of the resistances at 1.2010 and 1.2068. The indicators of technical analysis unanimously agree on a strong sell signal.
