EURUSD which has been on a corrective course post a three week bearish decline saw its momentum slow down since trading session began for the week. The pair hit a new 5 month low during American trading hours yesterday as dollar upsurge continues. Although yields are slightly weaker today, they remain well supported in the US, especially the short-dated ones, as investors continue to expect there to be at least two more rate increases from the Fed this year. Consequently, the Dollar Index is finding itself at its best level since December. Correspondingly, the EUR/USD pair is at its weakest since the end of last year.
EURUSD Hits Low
The euro meanwhile is coming under increased pressure because of Italy’s heightened political uncertainty, and recent soft patch in Euro zone data. Meanwhile Germany has constantly released weaker data in the first three months of the year meant that the economy expand by a modest 0.3% on the quarter, signaling a weaker and slower than expected growth in economy. The Euro zone GDP data was at 0.4% well in line with expectations. The Euro zone CPI measure of inflation was confirmed by Eurostat at 1.2% for April (YOY). With growth and inflation both weak and Italy’s political uncertainty at the forefront, the ECB is expected to be in a dovish stance when normalization of monetary policy is concerned.
This situation has lead to capping Euro’s uptrend momentum and any possible gain is Euro’s favor is likely to be capped below 1.20 in months to come. A look at the pair’s hourly chart shows that bear’s grip on market remains solid in short term. The price is expected to remain below 200 day average during this week’s trading session. The Pair has moved below psychological support of 1.18 and hence the region around 1.1820-1.1880 is viewed as region with stiff resistance for the remainder of this week. The price is mostly likely to move range bound around 1.1785 to 1.1710 if dollar continues to gain strength at current pace, while a sudden spike is USD’s value could result in pair teasing support around 1.1680 to 1.1650 before trading session closes for this week.