- The EUR/USD is trading lower on the day, falling from the 5-week highs.
- A mix of unimpressive data, mixed ECB comments, and a greenback comeback push the pair lower.
- The broader technical picture remains positive for the pair.
The EUR/USD is trading around $1.2420, down some 0.20% on the day after reaching 5-week highs at $1.2476. There are several reasons for the downturn:
1) US Dollar recovery: The US Dollar dropped against the Euro, and the Pound on Monday as fears of trade wars petered out. US Treasury Secretary Steven Mnuchin sounded optimistic about reaching agreements with China on trade. Today is already different, and the US Dollar is recovering. Also, end-of-month and end-of-quarter flows may already be in play.
2) Mediocre euro-zone data: German import prices fell by 0.6% in February, worse than 0.3% that was expected. Spanish CPI is up 1.3% YoY in March according to the preliminary release, below 1.5% that had been forecast. Private loans have decelerated to 2.9% in February, and the M3 Money Supply is down to 4.2% from 4.6% seen previously and expected. All the data is second-tier, but when everything goes in one direction, it already has an impact.
3) ECB Comments: The morning began on a positive note for the common currency after the ECB’s Vasiliauskas said that the prospects of a rate hike in mid-2019 sound reasonable and that a deeper discussion on policy changes is likely in June. However, another ECB member, Erkki Liikanen, said that the ECB’s bond-buying program is open-ended and that caution and patience are needed before removing stimulus. Another member, Ewald Nowotny, said that he sees a reduction of QE beyond September but did not support immediate removal of bond-buying.
All in all, the EUR/USD is facing headwinds and is reacting.
EUR/USD Technical Analysis – Still Positive
Despite the recent turndown, the pair is still trading in an upward channel, posting higher highs and higher lows. The break to $1.2476 sent the pair to a 5-week high. It continues trading above the 50-day Simple Moving Average. The RSI is also positive at 57, and only Momentum is lacking.
Looking up, the March 8th high of $1.2447 switches to resistance once again. The fresh high of $1.2476 is next. Further up, the 3-year top at $1.2555 towers above.
Looking down, the March 14th high of $1.2412 is the immediate support line. It is followed by $1.2360, a pivotal line with the range in March and then $1.2240, the low point last week.