Current price EUR/USD: 1.0430
- Bearish Chinese data undermined market sentiment at the weekly open.
- The European Commission has revised the growth forecast downwards and raised the inflation forecast.
- EUR/USD rose modestly, but its upside potential is still limited.
The EUR/USD pair is trading around 1.0430 ahead of Wall Street’s open, slightly higher on Monday. Financial markets started the week on the downside as Chinese data released during the Asian session raised concerns about economic growth. Retail sales in the country fell 11.1% year-on-year in April, while over the same period industrial production contracted 2.9%. Stocks fell and the US Dollar jumped on the news, although the gloomy mood faded during European trading hours, helping EUR/USD recover from an intraday low of 1.0388.
However, the common currency does not have much reason to rally. The European Commission has downgraded its projections for economic growth amid the war in Ukraine, as it now sees inflation rising at a faster rate this year and holding above the target for the European Central Bank until 2023.
In terms of data, Germany released the April Wholesale Price Index, which rose 2.1% m/m and 23.8% y/y, much worse than expected. The EU released the trade balance for March, which showed a seasonally adjusted deficit of -€17.6 billion. The United States will not release relevant data, with the focus on April retail sales to be released on Tuesday.
EUR/USD short-term technical outlook
EUR/USD is holding near its daily high of 1.0437, but the daily chart suggests the upside may be short-lived. The pair continues to develop below firmly bearish moving averages, while technical indicators correct oversold conditions, holding at negative levels. The 20 SMA is currently located around 1.0585, offering dynamic resistance.
The 4-hour chart shows that a bearish SMA of 20 rejected the bulls, while the technical indicators turned directionless in negative levels. The longer moving averages maintain their downward slopes well above the shorter one, reflecting the dominance of the bears. The pair still has room to test the 1.0340 region, while a break below should signal a steeper decline towards the 1.0200 region.
Support levels: 1.0385 1.0340 1.0300
Resistance levels: 1.0470 1.0510 1.0555
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