Bearish view
Bullish view
The EUR/USD pair continued its recent pullback even after some worrying European inflation numbers. It tumbled to the important support at 1.0800, its lowest level on May 24th as the US bond and stock market dipped. European inflation and US bond yieldsThere are signs that Europe is moving into a reflation period as prices rebound. A report published on Wednesday showed that the German inflation rebounded in May. The headline Consumer Price Index (CPI) rose from 2.2% to 2.4%, moving further away from the ECB’s target of 2.0%.Economists expect that other countries had higher inflation in May. The Spanish CPI figure is expected to come in at 3.7% up from last month’s 3.3%. In France, analysts believe that the headline inflation rose to 2.4%. Altogether, the median estimate for Europe’s CPI for May is 2.7%.These numbers will come a week ahead of the European Central Bank (ECB) meeting. The bank has hinted that it will deliver its first interest rate cut in this meeting. If this happens, it will be the third big bank to start cutting rates after Sweden’s Riksbank and the Swiss National Bank (SNB).It is unclear what the ECB will do after cutting interest rates in its June meeting. Some analysts expect that the bank will pause more cuts now that inflation has risen slightly in the past few months. Others expect it to deliver another rate cut in its August meeting.The EUR/USD pair has also slumped because of the performance of the US bond market. The 10-year and the 30-year bond yield rose to 4.625% and 4.73%, respectively. They soared to their highest level in over a month after a weak US $44 billion bond auction on Wednesday.The next important economic data to watch will be the upcoming US GDP report. The first GDP estimate showed that the US economy slowed to 1.6% in the first quarter. It had expanded by 3.4% in the fourth quarter of last year.The US will then publish the Fed’s favorite inflation gauge on Friday. Economists expect the data to reveal that the headline PCE retreated from 2.7% in March to 2.6% in April. EUR/USD technical analysisThe EUR/USD exchange rate has crashed hard in the past three days. This retreat happened after the pair formed a double-top pattern at 1.0890. In technical analysis, this is one of the most popular bearish signs.The pair has also crossed below the Woodie pivot point at 1.0845 and moved to the first support. This support coincided with the neckline of the double-top pattern. It has also crashed below the 25-period and 50-period moving averages.Therefore, the pair will likely continue falling as sellers target the second support of the Woodie pivot point at 1.0765.More By This Author:EUR/USD Forex Signal: Double Top Forms Ahead of Fed Beige BookAUD/USD Forex Signal: Fed And RBA Minutes Point To A ConvergenceBTC/USD Forex Signal: Bitcoin To Retest $67,265 Before Resuming Its Uptrend
