- EUR/USD stays on track to make its lowest weekly close of the year.
- US Dollar Index goes into consolidation near 94.80.
- Diverging monetary policy stance between the ECB and the Fed is the main story of the week.
Following its biggest daily loss, more than 200 pips, of the year on Thursday, the EUR/USD pair edged lower to a fresh two-week low at 1.1540 before making a modest recovery in the second half of the day. As of writing, the pair was trading at 1.1605, adding 0.32% on the day.
After the US President Donald Trump announced that they would start imposing 25% tariffs on $50 billion worth of Chinese goods effective July 6, investors started seeking safe-havens in the first half of the NA session, which ramped up the demand for the US Treasury bonds and dragged their yields lower, hurting the greenback. Moreover, the mixed macroeconomic data from the United States failed to bring back the USD bulls.
Today’s data showed that the industrial production in May contracted by 0.1% to fall short of the market expectation of 0.2% and the capacity utilization eased to 77.9% from 78.1%. On a positive note, the preliminary reading of the UoM Consumer Sentiment Index rose to 99.3 from 98. As of writing, the US Dollar Index was moving sideways near 94.80, losing 0.14% on the day.
Despite today’s rise, however, the EUR/USD is looking to close the week at its lowest level since November as the primary driver of the pair’s price action remains as the diverging monetary policy outlooks between the Fed and the European Central Bank.
Technical outlook
With a daily close below 1.1510/1.1500 (May 29 low/psychological level), the pair could extend its fall to 1.1430 (Jul. 17, 2017, low) and 1.1370 (Jul. 13, 2017, low). On the upside, short-term resistances align at 1.1700 (psychological level/20-DMA), 1.1800 (psychological level/Jun. 13 high) and 1.1850 (Jun. 14 high).
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