The EURUSD pair has been on a steep bearish decline across the month of May 2018. This downtrend was inspired by multiple geo-political triggers as well as strong economic performance in US markets. The EURUSD pair hit 2018 high at the month of February reaching 1.25554 post which it traded range bound from 1.22 to 1.24 price range till mid-April. However the pair started decline in later half of April as US treasury bonds yields crossed multi-year highs reaching above 3% and US GDP for Q1 turned out better than expected the pair started to lose momentum to US Greenback. As the pair moved into month of May 2018, the common currency has lost all of the gains made in first four months of year moving well below multiple support levels and was trading around mid December price range well beginning its decline into new 2018 lows.
EURUSD Has a Tough Time
The first week of May 2018 saw the EURUSD pair testing 1.20 price handle. Macro data was fairly mixed in US Calendar with dovish Non-Farm Payroll data and ISM manufacturing & Non-Manufacturing PMI. While a positive Eurozone GDP data helped limit the decline, Eurozone CPI data which came later in the day was dovish and this resulted in pair testing 1.18 price handle by end of first week. The second week of May 2018 had a relatively light macro calendar for majority of the week. This helped EURUSD pair try and regain some of the losses incurred the previous week. Macro Calendar had no activity in Euro zone expect for a speech by European Central Bank President Draghi while US markets saw another week of dovish inflation data. With Both CPI & PPI data in US markets turning worse than expected the EURUSD pair managed to close the second week of May 2018 well above 1.19 price handle.
However Bear’s grip on market continued to remain strong on third week of May. While the week opened on positive note for common currency with pair moving as high as 1.19960 influenced by Draghi Hawkish comment, the pair saw a steep decline for rest of week. On release font Euro Zone and US markets both saw dovish outcome on Tuesday however US market saw positive Building Permits and Philadelphia Fed Manufacturing Index data on later half of the week. This along with increasing tension in Italian political scenario caused the pair to close for the week below 1.17 price handle. Italian Crisis continued to support Euro bulls across fourth week of May. On release font Macro data was initially dovish for both Euro zone and US markets, US Treasury bond yields also slowed down during fourth week of May. However dovish inflation data across major markets in Euro zone, positive US PMI data and stable equities market increased the probability of Fed rate hike in near future which resulted in EURUSD pair seeing further decline moving well inside 1.16 price handle.
EURUSD Expected to Continue Lower
The last week of May saw pair hit new 12 month low at 1.15090 before making a bullish rebound. As the pair hit its new 12 month low the pair had seen nearly 800 pip declines since its 2018 high. Some of the factors that lead this steep downfall during last week include increase geo-political issues in Euro zone such as uncertain political scenario in Italy and Spain and spread widening in Italian-German bonds over Italian political crisis which lead to dumping of Italian-German bonds in huge volume. However US markets once again saw a dovish macroeconomic scenario with bearish GDP, NFP and Pending home sales data and Eurozone saw positive CPI and German unemployment rate. This along with Italian Government managing to agree on cabinet with President cooling down the tension around Italian crisis lead to the pair seeing a bullish rebound on early hours of Friday’s trading session where the pair managed to move into 1.17 price handle.
However Spanish lawmakers voted to oust the conservative Prime Minister Mariano Rajoy which resulted in Euro declining back to 1.16 price range as trading session closed for the week. Currency trading is very dependent on both market sentiment and macro economic data. Currently macro data this past week has been bearish in US markets and US Greenback also faces pressure from possibility of trade war with its allies post President Trump’s decision to levy tariff on Aluminum and Steel import from Europe, Mexico and Canada. The first week of June 2018 is expected to see positive macro-economic data in European markets. All these factors support possibility of further uptrend movement in common currencies favor. However some major impact news in US markets are also expected to have positive outcome which limits possibility of Euro’s upward momentum in 1.20 price handle. Investors await Asian market hours to view full impact of Span’s ousting of Prime minister on common currency before placing further bets. As of now the market sentiment remains positive in Euro’s favor and is expected to remain that way across majority of next week.