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EUR/USD depressed in lower range – 5 reasons

EUR/USD continues struggling. After the common currency suffered from the undoing of the ECB’s hawkish tilt, euro/dollar finds fresh reasons to slide. The pair trades on lower ground but still remains shy of critical support.

What is behind the falls? Here are five reasons for the most recent depression that the world’s most popular currency pair suffers from:

  1. Spanish CPI misses: Europe’s fourth-largest economy was hit hard by deflation only to see prices leaping at above the European average, reaching 3%. But things have changed once again.  Monthly CPI is only 0% against 0.2% expected. Year over year, it stands at 2.3%, down from 3% and below expectations. Also, the HICP is  significantly lower, at 2.1% against 2.7%. This feeds into the euro-zone figure that will be published tomorrow.
  2. German states report lower inflation: The data is dripping out of Germany’s 16 states ahead of the all-German publication at 12:00 GMT. Saxony saw weaker year over year price rises at 1.8%. Brandenburg follows suit with a  slower rate of 1.4%, Bavaria with 1.7% and Hesse at 1.7%. All the numbers are below the figures for March.
  3. Trump soft on NAFTA?: According to a publication by the Wall Street Journal, the Trump Administration is set to ask for modest changes to the North American Free Trade Agreement that the president threatened to tear apart. This softer approach supports the dollar. In fact, also Canada and Mexico support updates to the 20-year old agreement.
  4. Infrastructure program?: The administration is talking about infrastructure a bit more loudly. The topic that drove the dollar higher in late 2016 was shoved to the bottom of the pile but re-emerges now. Trump’s Transportation Secretary Elaine Chao is looking into a 10-year program worth a total of 1 trillion dollars. It is important to note that some of the money will come from the private sector and that details are scant at the moment.
  5. Hawkish Fed?: After the Fed made its “dovish hike“, FOMC officials did not move too far from the line. However, as more of them come up to speak, they sound more hawkish tones. Eric Rosengren of the Boston Fed said four rate hikes may be needed. This is quite hawkish, to say the least. Markets have doubt about the Fed’s projected three hikes. This stance, coming from a  dove or at least a centrist, is quite hawkish.

Here is how the move looks on the chart. Support is found at 1.0720, followed by 1.0660. Resistance is at 1.0775, followed by 1.0830. The current range is 1.0720 to 1.0775.

A big event awaits the pair later today. See how to trade the US GDP with EUR/USD.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.