Technical Bias: Slightly Bearish
- EURUSD tumbles to mid-1.11 region as US dollar strengthens across the board.
- US dollar index rebounds above 95.00.
- Eurogroup meetings kickoff in Brussels on Monday.
The EURUSD fell below 1.12 on Monday, as a China rate cut supported the US dollar ahead of a crucial Eurogroup meeting in Brussels concerning the future of Greece’s bailout program.
The EURUSD tumbled 0.6 percent to 1.1139, rebounding from an intraday low of 1.1133. The pair is likely to test the initial support at 1.1112. On the upside, resistance is likely found at 1.1270.
The EURUSD has been rebounding since April’s low of 1.0573. The pair has rebounded more than 5 percent over that period, mostly stemming from a broad reversal for the US dollar. The US dollar index, a trade-weighted average of the dollar against six rival currencies including the euro, was up 0.3 percent to 95.10 on Monday.
China Rate Cut
The People’s Bank of China slashed interest rates for the third time in six months over the weekend, as Beijing seeks to kick start a sluggish economy. The PBOC lowered the overnight rate to 5.1 percent from 5.35 percent.
A separate report showed a further drop in CPI inflation, leading many analysts to believe that another rate cut may be on the horizon. China’s inflation rate fell 0.2 percent in April and was up 1.5 percent annually, official data showed.
Eurozone finance ministers touched down in Brussels on Monday to continue negotiations on a new bailout deal for Greece just one day before Athens must make a €750 million loan payment to the International Monetary Fund. While Eurozone ministers have ruled out the possibility of a final agreement this week, they are negotiating whether to release a portion of the bailout funds that would help the cash-starved Greek government keep some of it programs functioning.
Talks broke down last week after Greece made it clear it would not depart from its election promises. These “red lines” halted negotiations, putting Athens another step closer to a default.
Greece has until the end of next month to strike a new accord with its creditors.