EUR/USD – Euro rally hits 6-week high as Fed’s Bullard says rate cut needed

EUR/USD continues to gain ground, after starting the week with strong gains. Currently, the pair is trading at 1.1249, up 0.06% on the day. Earlier in the day, the pair touched a high of 1.1277, its highest level since mid-April. On the release front, eurozone consumer inflation indicators disappointed. The estimate for annual inflation in May slowed to 1.2%, down from 1.7% in April. The core indicator also fell, dropping to 0.8%, after a reading of 1.2% in April. Both indicators missed their forecasts. There are no major events out of the U.S. On Wednesday, the eurozone releases retail sales, while the U.S. posts ADP nonfarm payrolls and ISM Non-Manufacturing PMI.

The week has started out with disappointing data in the eurozone. The estimate for consumer inflation slowed in May, a reflection of weaker economic activity in Germany as well as the rest of the eurozone. The downward slide continues for German and eurozone manufacturing PMIs, which have been mired in contraction territory for most of 2019. This is a result of ongoing trade tensions, which have reduced global demand for German and eurozone exports, and dampened the manufacturing sectors.

Despite soft eurozone data this week, the euro has gained ground, courtesy of FOMC member James Bullard. The president of the St. Louis Fed was blunt and pessimistic, saying that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. Bullard warned that the Fed may have to deal with “an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty“. Bullard added that the current benchmark rate, which is at a range of 2.25% to 2.50%, is too high for current economic conditions, and recommended lowering rates in order to stabilize the economy. The dovish comments about lower rates helped boost the euro on Monday.

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EUR/USD Fundamentals

Tuesday (June 4)

• 2:45 French Government Budget Balance. Actual -67.2B
• 3:00 Spanish Unemployment Change. Estimate -67.0K. Actual -84.1K
• 4:00 Italian Monthly Unemployment Rate. Estimate 10.2%. Actual 10.3%
• 5:00 Eurozone CPI Flash Estimate. Estimate 1.4%. Actual 1.2%
  
• 5:00 Eurozone Core CPI Flash Estimate. Estimate 1.0%. Actual 0.8%
  
• 5:00 Eurozone Unemployment Rate. Estimate 7.7%. Actual 7.6%
  
• 8:30 US FOMC Member Williams Speaks
• 9:55 Federal Reserve Chair Jerome Powell Speaks
• 10:00 US Factory Orders. Estimate -1.0%

Wednesday (June 5)

• 5:00 Eurozone Retail Sales. Estimate -0.5%
• 8:15 US ADP Nonfarm Employment Change. Estimate 185K
• 10:00 US ISM Non-Manufacturing PMI. Estimate 55.6

*All release times are DST

*Key events are in bold

EUR/USD for Tuesday, June 4, 2019

EUR/USD for June 4 at 5:55 DST

Open: 1.1242 High: 1.1277 Low: 1.1241 Close: 1.1249

EUR/USD Technical

EUR/USD was flat for most of the Asian session and has posted small gains in European trade

• 1.1120 is providing support
• 1.1212 is the next resistance line
• Current range: 1.1120 to 1.1212

Further levels in both directions:

• Below: 1.1120, 1.1046 and 1.0950
• Above: 1.1212, 1.1300, 1.1434 and 1.1553

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