Senior Market Strategist

Total Content 192

Articles 176

EURUSD update

By David Morrison  |  23/05/2018 15:20

”italian
This article looks at some of the drivers behind euro weakness and the daily EURUSD chart

The EURUSD currency pair took another lurch lower today. The single currency came under further selling pressure following the release of a clutch of disappointing Services and Manufacturing PMIs from across the Euro zone. The IHS Markit Euro zone Composite PMI fell to 54.1 in May from 55.1 in the previous month, below the 55.0 expected. This was the slowest expansion in private sector activity since November 2016 and displays a worrying downward trend. This has added to concerns that the Euro zone GDP growth may not bounce back after recording a disappointing quarter-on-quarter reading of just +0.4% for the three months to March 2018. The news makes it even more difficult for the European Central Bank (ECB) to produce a detailed roadmap for further winding down its Asset Purchase Programme. This is consistent with comments last night from ECB Governing Council member Benoit Coeure who said bank’s monthly bond purchases won’t end abruptly after September, although he hedged himself by saying he wasn’t worried by last quarter’s slowdown in growth and was confident that inflation will rise.

Meanwhile, US Manufacturing and Services PMIs both increased from the prior month, further emphasising the divergence between the US and euro zone economies. This only helped to encourage traders to increase their exposure to the dollar.

All this is playing out against the backdrop of an unsettled political situation in Italy. The Five Star Movement and Northern League have put forward Giuseppe Conte, a relatively obscure (and now somewhat controversial) economics professor, as their preferred candidate for Prime Minister. Italian President Sergio Mattarella was understood to be stalling his decision and thereby holding up the formation of a new government. However, it was reported by ‘La Repubblica’ earlier today that he has now approved Conte and asked him to try and form a government. This means that Italy could now governed by two Eurosceptic parties who appear determined to face down Brussels and blow out the country’s budget. 

”eurusd
All this has contributed to euro weakness which saw the EURUSD hit its lowest level so far this year. The sell-off accelerated after the pair broke out of the triangle pattern towards the end of April and since then the euro has lost around 4.5% against the dollar. Looking at the daily chart, the EURUSD is approaching support around 1.1700. This is roughly where the two shoulders of last year’s inverse head and shoulders pattern formed last year. A break below here opens the possibility of a fall towards the ‘head’ which comes in around 1.1600.
 
Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.


 

Share

Author's Other Opinion & Analysis

Show More Articles

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com