EURO TALKING POINTS

EUR/USD remains bid even as the Euro-Zone Producer Price Index (PPI) unexpectedly narrowed to an annualized 2.0% from 2.1% in April, but the break of the November-low (1.1554) keeps the broader outlook tilted to the downside amid the growing uncertainties surrounding the monetary union. With the Trump Administration on track to impose tariffs on steel and aluminum imports from Europe, the growing threat for a global trade war paired with the lack of progress surrounding the Greek bailout program may keep the single currency under pressure as it encourages the European Central Bank (ECB) to further expand its balance sheet.

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EUR/USD FAILS TO RETAIN BULLISH SERIES, OUTLOOK MIRED BY RENEWED FEARS SURROUNDING GREECE

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Even though officials in Italy managed to form a coalition government, renewed fears surrounding Greece may keep the Euro under pressure as the region and its creditors struggle to reach an agreement with the International Monetary Fund (IMF) ahead of the G7 Summit on June 8 – 9.

Failure to secure a bailout extension may push the ECB to buy more time at the next meeting on June 14, and the Governing Council may continue to pursue a wait-and-see approach as the central bank struggles to achieve its one and only mandate for price stability. As a result, President Mario Draghi and Co. may largely refrain from revealing a more detailed exit strategy, with more of the same from ECB officials likely to dampen the appeal of the Euro as the central bank remains in no rush to conclude its easing-cycle.

EUR/USD DAILY CHART

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  • Will keep a close eye on the monthly opening range for EUR/USD, with the pair at risk of facing range-bound conditions over the coming days as it remains capped by the 1.1790 (23.6% retracement) to 1.1810 (61.8% retracement) region.
  • Failure to preserve the series of higher highs & lows from the previous week raises the risk for a run at the 2018-low (1.1510), with the next region of interest coming in around 1.1390 (61.8% retracement) followed by the Fibonacci overlap around 1.1210 (61.8% retracement) to 1.1220 (78.6% retracement).

For more in-depth analysis, check out the Q2 Forecast for the Euro

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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.