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EUR/USD – Euro rally continues as Fed’s Powell hints at rate cut

EUR/USD has posted winning sessions for three successive days, and the upward trend has continued on Wednesday. Currently, the pair is trading at 1.1284, up 0.26% on the day. On the release front, German and eurozone services PMIs beat expectations, with scores of 55.4 and 52.9, respectively. Eurozone retail sales dropped 0.4%, its first decline in four months. In the U.S., ADP nonfarm payrolls is expected to drop to 185 thousand in May, after a sparkling gain of 275 thousand in April. ISM Non-Manufacturing PMI is projected to show strong expansion, with an estimate of 55.6. On Thursday, the ECB is expected to maintain its key interest rate at a flat 0.00%. In the U.S., the key event is unemployment claims.

There were no surprises from the PMIs readings in May. The services sector continue to shows expansion in both Germany and the eurozone. The German release slowed to 55.4, down from the reading of 55.7 in April. It was a different story for manufacturing, as manufacturing PMIs pointed to contraction in Germany and the eurozone. Both indicators 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.

The Federal Reserve has tried to present an aura of neutrality regarding rate moves, but has taken a sharp U-turn this week in favor of an easing bias. On Tuesday, Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments. This comes on the heels of comments from James Bullard, president of the St. Louis Fed. Bullard stated 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.

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EUR/USD Fundamentals

Wednesday (June 5)

Thursday (June 6)

*All release times are DST

*Key events are in bold

EUR/USD for Wednesday, June 5, 2019

EUR/USD for June 5 at 7:05 DST

Open: 1.1252 High: 1.1289 Low: 1.1251 Close: 1.1261

EUR/USD Technical

S1 S2 S1 R1 R2 R3
1.1046 1.1120 1.1212 1.1300 1.1434 1.1553

EUR/USD ticked higher in the Asian session. The pair edged higher in European trade but has given up these gains

Further levels in both directions:

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher [6]

Market Analyst at OANDA [7]
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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