EUR/USD Remains Under Modest Selling Pressure
Frankfurt (June 6) EUR/USD is down 0.05% from Monday’s North American close, currently trading at 1.1248. The pair has been under modest selling pressure since breaking out to new recovery highs in the wake of the release of the weak US May employment report last Friday.
Despite the pullback from the 1.12850 high established following the jobs data, the bullish implications of the rally remain intact. However, investors will likely maintain a cautious tone ahead of Thursday’s European Central Bank (ECB) policy statement, which is due at 07:45 ET and will be followed by a press conference by Bank President Draghi at 08:30 ET.
Rates are expected to remain unchanged at 0%. However, investors will be watching for revisions to the bank’s statement and any mention of tapering. Although there have been improvements in the Eurozone economy since the April meeting, the appreciation in EUR/USD since that time could result in weakness in upcoming data. Therefore, investors will be all-ears regarding the tone of Draghi’s press conference.
While a continued sideways-to-lower path could characterize price action heading into Thursday, the overall bias in EUR/USD remains to the upside given the bullish price action that has taken place in recent months. Most recently, the pair broke out to the upside of a bull flag formation which developed following the establishment of the May peak. EUR/USD confirmed an upside breakout from the flag formation on May 31st, and the target derived from measuring the distance of the advance prior to the flag formation and projecting that up from the breakout point is 1.1650.
A break back within the flag formation is required to negate the pattern and its upside target. At present, this would require a drop back below the 1.1180 level. Such a decline is currently not expected and periods of weakness appear best used as buying opportunities.
In today’s session, Eurozone Retail Sales was reported at 05:00 ET. The month-over-month figure came in at 0.1% for April, lower than the expected reading at 0.2%. Year-over-year, the 2.5% reading beat forecasts for a 2.3% increase. EUR/USD declined from the 1.1255 level to 1.1245 on the release of the report, but has since stabilized and is drifting in a trading range near the lows of the session.
In the US, today’s economic calendar contains the low-impact JOLTS – Job Openings report at 10:00 ET.
The US dollar index is currently lower on the day, down 0.09% at 96.71. The dollar came under significant selling pressure last Friday after the release of a much weaker than expected US employment report. Although the greenback attempted to gain back some ground on Monday, upside momentum was lacking and, at present, the broader bias in the dollar remains to the downside.
Source: EconomicCalendae
