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EUR/USD has been trading impulsively amid the bullish momentum which is currently being engulfed as the price has broken below 1.1250 under strong bearish pressure.
The ECB has been under pressure dealing with the budget deficit and sluggish inflation that is to blame for EUR's weakness. Bond yields dropped recently in light of downbeat economic data, putting pressure on central banks to carry out drastic new monetary stimulus to prop up inflation from further deceleration. Moreover, a key gauge of financial markets' long-term expectations for inflation in the euro zone recently fell to as low as 1.1%. Greece's new conservative government is going to speed up economic growth and maintain healthy public finances by every measure possible which aroused hawkish attention among market participants but not quite strong to have an immediate effect on EUR's gains.
Today German ZEW economic sentiment report was published with a decrease to -24.5 from the previous figure of -21.1 which was expected to be at -22.1. Besides, the eurozone's trade balance proficit widened to 20.2B from the previous figure of 15.3B which was expected to be at 16.4B. Tomorrow the eurozone is due to release a final CPI which is expected to show a flat reading of 1.2%.
On the other hand, the Federal Reserve, especially Chairman Jerome Powell, has been targeted by the US government for its rhetoric. So, the US central bank has to resort to a rate hike. Some Fed officials believe that lower interest rates would help to achieve the inflation goal. Investors are betting that the Federal Reserve will announce a decrease in the benchmark overnight interest rate on July 30-31. Recently Powell's testimony for Congress cemented expectations for a rate cut this month. The policymaker also acknowledged for the first time publicly that officials have potentially tightened monetary policy too much because they underestimated shifts in the US economy. The biggest news is that Powell has made a major concession about a policy error over the past four years.
Today US retail sales and core retail sales reports are due in the North American trade. Retail sales are likely to contract to 0.1% from the previous value of 0.5%. Import prices is also expected to drop to -0.7% from the previous value of -0.3%.
To sum it up, USD is currently drifting lower amid negative expectations of pending macro economic reports. At the same time, EUR is struggling to maintain momentum. The pair could face correction under higher volatility.
TECHNICAL OVERVIEW:
The price is currently trading below 1.1250 under impulsive bearish pressure which is expected to push the price lower towards 1.1200 and later towards 1.1120 support area in the coming days. As the price recently broke below the medium-term trend line support, further bearish pressure is more likely. However, as the price remains below 1.1250 with a daily close, this opens the door to the bearish bias.
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