Technical Bias: Bearish
- EURUSD finds daily bottom at 1.0892, recovers in the mid-1.09 region.
- German HICP rises 0.7% YoY following gain of 0.3%.
- US personal incomes rise 0.4% in April, but personal spending remains flat.
The EURUSD backtracked on Monday, cutting short a three-day rally despite a bigger than expected pick up in German inflation.
The EURUSD declined 0.3 percent to 1.0947, recovering from an intraday low of 1.0892. The pair had posted a strong rally in the latter half of the previous week, climbing back toward 1.1000. The outlook on the EURUSD remains bearish. Initial support is likely found at 1.0940 followed by 1.0892, the daily low. On the upside, initial resistance is likely found at 1.1021 followed by 1.1054.
German Inflation Gathers Pace
Germany’s consumer price index of goods and services rose faster than forecast in May, but inflation remained well below the European Central Bank’s official target, government data showed on Monday.
Germany’s harmonized index of consumer prices (HICP), which calculates inflation using the European Union’s methodology, increased 0.7 percent annually in May, preliminary data showed. The HICP was up 0.1 percent compared to April.
The European Central Bank will hold a policy meeting in Frankfurt, Germany later this week. Policymakers are widely expected to maintain the central bank’s currency stimulus plan, which is designed to run until at least September 2016. The official rate announcement will be made on Wednesday.
US Personal Incomes Rise
Personal income from all sources rose more than forecast in April, but consumer spending was unchanged as consumers cut back on big purchases in order to increase savings.
Personal income increased 0.4 percent in April after registering no growth the previous month, the Commerce Department reported on Monday. Personal spending was unchanged following an upwardly revised gain of 0.5 percnet.
The core personal consumption expenditure (PCE) price index – the Federal Reserve’s preferred measure of inflation – edged up 0.1 percent in April following an identical increase the previous month. In annualized terms, the core PCE rate was 1.2 percent.