- EUR/USD remains unable to pick up upside traction so far this week.
- German Unemployment change rose more than expected in May.
- Italian Consumer Confidence surprised to the upside this month.
The mood around the European currency remains far from cheerful so far this week, with EUR/USD still orbiting around the 1.1150 region and giving no signs of any bullish intentions for the time being.
EUR/USD offered on data, looks to yields
EUR keeps the flat/bearish note unchanged on Wednesday in the wake of disappointing results from the German labour market, where the Unemployment Change increased by 60K during May and the jobless rate ticked higher to 5.0%.
On the brighter side, albeit less relevant for the markets, Italian Consumer Confidence rose to 111.8 for the current month and Business Confidence edged higher to 102.0 for the same period, both prints coming in above expectations.
In the meantime, the greenback keeps trading on a firm footing despite yields of the key US 10-year note are extending the decline to the vicinity of 2.22%, levels last seen in September 2017, and the yield differential vs. their German peer fell below the key 240 pts.
What to look for around EUR
Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. This view has been reinforced in recent ECB minutes, where the Council appeared unconvinced about a pick up in the economic activity in H2 2019. That said, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italian politics has resurfaced as a source of uncertainty and volatility, all gyrating around the country’s discomfort with EU fiscal rules.
EUR/USD levels to watch
At the moment, the pair is retreating 0.03% at 1.1156 and faces immediate contention at 1.1142 (low May 21) seconded by 1.1107 (2019 low May 23) and finally 1.0905 (high Mar.27 2017). On the upside, a breakout of 1.1215 (high May 27) would target 1.1230 (55-day SMA) en route to 1.1264 (monthly high May 1).
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