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Daily Market Update: Eurozone Outlook

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News Commentary


The German Final CPI results were not unexpected. The indicator dropped to 0.0%, marking a 3-month low. The Eurozone Final CPI went to 1.2%, down from 1.3% last month. The Eurozone Final Core CPI dropped from 1.0% to 0.7%. If inflation levels continue to soften, the ECB will have to extend its stimulus program, which is set to run until September. Germany will release additional inflation numbers on Friday.

First-quarter Eurozone and German GDP data were within expectations, but investors should not become too bullish, as the numbers referred to a slowdown in the economy. Both Germany and the Eurozone gained 0.6% in the fourth quarter of 2017. Analysts don’t seem optimistic. The German indicator posted a sharp drop of -8.2 for a second straight month, the first declines since July 2016. The low reading certainly doesn’t show much optimism.

The EUR has another battle with Italy’s new leader’s elections, who may propose new deficit spending that appears to tighten the EU Growth.

All eyes will be on US Unemployment Claims with expectations of 216K.


Chart Analysis


EUR/USD

On the daily chart, the price has a strong down rally after reversing from the resistance level of 1.1950 with a pin bar. The price is expected to go down to the support zone of 1.1680-1.1550, provided by the broken descending lower channel. Then, it is supposed to work its way back up from these levels with a push from the harmonic pattern & divergence in RSI to reach the resistance zone again.


 

 


USD/JPY

The price is located at a very strong short-selling area, rebounding from the descending trend line from the high of 2018. Besides the broken uptrend line from the low of 2011, also reaching the top edge of the upward channel along with forming an AB=CD harmonic pattern with divergence on RSI. The price also is about to shape a double top pattern. We will wait for a bounce from these levels and break beneath the upward channel to go short to our targets of 108.1 then 104.8.

 


 

 

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