Technical Bias: Bullish
- EURUSD targeting monthly highs at 1.1341.
- Eurozone Q1 GDP advances 1% YoY.
- Germany CPI advances 0.5% YoY.
- US retail sales flat in April.
A stronger Eurozone recovery supported the EURUSD on Wednesday, while disappointing US consumer spending continued to close the lid on a June rate increase by the Federal Reserve.
The EURUSD was targeting one-month highs at 1.1341 on Wednesday, climbing more than 100 pips to 1.1325. The EURUSD would subsequently consolidate at 1.1310, advancing 0.8 percent. The MACD supports further bullish upside for the EURUSD, although the hourly chart suggests the pair has entered overbought territory. Nevertheless, the euro should remain well supported amid a general decline for the US dollar. Initial support is located at 1.1139. The monthly high of 1.1341 is the next major resistance test.
Eurozone Recovery Gains Traction
Eurozone gross domestic product expanded 0.4 percent in the first quarter, raising optimism about the recovery despite ongoing concerns over Greece’s future in the currency region. Compared to last year, Eurozone GDP expanded 1 percent, the European Commission said on Wednesday. A median estimate of economists called for an annual increase of 1.1 percent.
For the first time since 2010, GDP expanded in all four of the Eurozone’s largest economies, GDP expanded 0.3 percent in Germany, 0.6 percent in France and 0.3 percent in Italy, official data showed.
German Inflation Gains Traction
Europe’s biggest economy saw higher inflation in April, as consumer prices rose 0.5 percent year-on-year, the Federal Statistics Office said in its final estimate. Using the harmonized index of consumer prices (HICP) – the European Union’s inflationary yardstick – inflation in Germany rose 0.3 year annually.
US Retail Sales Disappoint
US retail sales stalled unexpectedly last month, raising concerns about the consumer-led recovery at the start of the second quarter. Seven of the 13 major retail categories posted declines, led by a 0.9 percent drop at furniture stores and a 0.7 percent decline at gasoline stations.
The figures likely reinforce the Federal Reserve’s cautious approach to monetary policy and remove the likelihood of a June rate hike. The Fed is expected to wait until at least September for it begins normalizing interest rates.