The EUR/USD currency pair struggles to retain the 1.1600 level. At the same time, U.S. dollar bearish sentiments are building on the foreign exchange scene. The two reached recovery resistance that was established earlier in the month, and the dollar pair succumbed to heavy selling around 1.1630. This pressure caused a last-minute drop right before the US market opened. The recent performance of the pair highlights a complex interplay of economic indicators and political developments that may continue to influence its trajectory.
After falling significantly on Wednesday, the EUR/USD ticked up on Thursday, briefly recovering some of those losses. This upside was ephemeral, as the pressure re-emerged at about the 1.1630 level. The decline picked up steam just ahead of the US market open. This move underscored a risk-off mood, exacerbated by discouraging economic data dropped this morning.
US Producer Price Index (PPI) figures for June shocked the markets with a much stronger than expected outturn. This stronger performance has played a role in creating a bearish outlook for EUR/USD. The PPI increased by 2.3% YoY, but this was weaker than expected. The Consumer Price Index (CPI) data for June were in line with market expectations. It was an increase over May’s numbers. Core CPI yearly inflation rose from 2.8% in May to 2.9% in June. This acceleration indicates that inflationary pressures continue to build in the US economy.
Against this challenging economic backdrop, perhaps the most unexpected, yet potent factor to weave its way into market sentiment has been rising political tensions. US President Donald Trump has said he will slap on further trade taxes. He has undermined his own administration by publicly attacking Federal Reserve Chairman Jerome Powell. This type of political rhetoric has a tendency to spook financial markets, which can then reinforce downward pressure on the EUR/USD exchange rate.
From a technical perspective, the EUR/USD pair is attempting to remain above the bullish 200 Simple Moving Average (SMA). This SMA is found a little below the key support area of 1.1600. This SMA helps to anchor a support region near 1.1590, providing a bit of relief to the beleaguered currency pair. Yet, technical indicators suggest a slightly downward trend on the wrong side of zero, suggesting that’s still more decline to come.
EUR/USD is trading at the lowest point since it broke out of its range earlier this spring. That is now encountering the 61.8% Fibonacci retracement of the rally from 1.1453 to 1.1830. The ongoing struggle at this key Fibonacci level signifies a lack of momentum for the euro against the dollar, raising concerns about the potential for deeper declines.
As the market continues to digest economic data and political developments, traders may remain cautious regarding their positions in EUR/USD. That mix of bearish technical indicators and mixed economic signals makes for a hazy landscape for investors and analysts both.