German weakness weighs on EUR/USD
- EUR/USD remains on the back foot amid disappointing German data.
- Trade concerns and US GDP will likely set the tone later today.
- Thursday’s four-hour chart is pointing to further falls.
Markets are beginning to buy into the US-Sino calls for calm on trade – and EUR/USD is feeling it. US Treasury Secretary Steven Mnuchin has expressed optimism regarding new talks with China. And the commerce ministry in Beijing has said that the interests of both countries are intertwined calling for de-escalation.
These soothing words have joined President Donald Trump’s optimism from earlier this week – and have pushed US bond yields off the lows. The 10-year benchmark has topped 1.50% after diving lower on Wednesday. Treasury markets now reflect a lower chance for massive rate cuts in the US – and the US dollar is rising.
Later today, the US releases a revision for its Gross Domestic Product growth in the second quarter. A minor revision from 2.1% to 2.0% is projected – and any deviation may rock markets.
Apart from the headline, markets will examine the details. Consumption has been robust while investment has disappointed.
German weakness overshadows Italian stability
Germany has reported an increase of 4,000 in the number of unemployed – as expected – but the fourth consecutive rise after many years of constant falls. Carsten Brzeski, chief economist at ING :
The negative impact of the industrial meltdown of the last twelve months has started to spread to other parts of the German economy.
Recession fears are growing in the continent’s largest economy – and this weighing on the euro.
Germany remains in the focus when it publishes inflation figures later on. Early publications from several German states are pointing to a moderation – adding pressure on the European Central Bank to act.
Italian prime minister Giuseppe Conte will get to keep his job by forming a new government. It will include the pro-European Democratic Party instead of the far-right League as coalition partners of the 5-Star Movement. President Sergio Mattarella has officially given Conte the mandate after the 5-Star and PD resolved several differences.
The was already priced in and failed to boost the common currency. Markets had feared that Italy would go to the polls – creating uncertainty and perhaps another clash with the EU.
France, the second-largest economy, has revised its GDP to the upside – 0.3% from 0.2% in the second quarter.
Overall, data from both sides of the Atlantic and trade developments are in the spotlight.
EUR/USD Technical Analysis
Momentum on the four-hour chart has turned negative and USD continues trading below the 50, 100, and 200 Simple Moving Averages – bearish signs. It also continues trading in a downtrend channel.
Support awaits at 1.1050, which provided support late last week. The next level to watch is 1.1027 – the 2019 low. 1.1000 and 1.0960 are next.
Resistance awaits at 1.1115, which has capped the pair several times in recent weeks. It is closely followed by 1.1130 – twice a support line – and by 1.1165.