EUR/USD certainly woke up in the past 24 hours. After making a break above 1.30, it now loses the line in a sharp, unexpected fall, with a gap lower.
The background is the release of employment and inflation numbers, but these actually came in within expectations. Month end madness?
The pair was trading steadily in a range above 1.30: 1.3030 was the latest figure before 9:00 GMT. The next level was already 1.3015 and the pair moved quickly below 1.30, trading at 1.2983 at the time of writing.
Update: the fall was also ignited by comments made by the Italian ECB member Ignzaio Visco: he said that the ECB is ready to intervene again on rates and will consider all measures. This could have been interpreted as a hint for a negative deposit rate. Visco already raised this option recently.
The annual level of inflation was expected to rise from 1.2% to 1.4%, and this was also the actual result. The number is below the ECB’s 2% target, but came as no surprise. The unemployment rate in the euro-zone climbed from 12.1% to 12.2%. Yet again, the figure is bad, but did not come as a surprise.
So, the move seems more related to end of month flows: the dollar strengthened quite a lot in May. This strength was partially corrected with the dollar falling in recent days.
However, as the end of month also comes to and end, we can see a resumption of the bigger trend which is a stronger dollar.
Weak support appears at 1.2960, followed by 1.2880. Resistance is at 1.30, followed by 1.3050. For more, see the EUR/USD forecast. Here’s how it looks on the chart:
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