Euro slides as weak economic data point to a deep recession
The euro declined today as the market reflected on a slew of negative data from Europe and the German court decision released yesterday. In a statement, the ECB said that its quantitative easing program was legal based on a ruling by the European court of justice. From the data side, we received weak retail sales, services PMI, and the EU Commission’s guidance on the economy. The retail sales fell by 11.2% in March after rising by 0.6% in the previous month. The sales fell by an annual rate of 9.2%. Meanwhile, the services PMI declined to a record low of 12.0 in April. In a separate statement, the European Commission predicted that the region’s economy will contract by 9.2% this year.
The Australian dollar was little changed even after the Australian Bureau of Statistics released strong retail sales data. The numbers showed that sales rose by 0.7% in the first quarter, which was higher than the third-quarter’s increase of 0.5%. The sales rose by 8.5% in March as many Australians rushed to buy household items ahead of the lockdown. Analysts have been optimistic about the Australian economy now that several states have started easing their lockdowns. From the United States, data from ADP showed that private payrolls in the US declined by more than 20 million in April.
The price of crude oil bounced back from earlier losses as the market waited for inventory data from the US. The price had declined earlier on as investors grew concerned about rising inventories in the US. This followed a report released yesterday by the American Petroleum Institute (API). The report showed that inventories rose by more than 8 million barrels, which was higher than the 7.9 million that analysts were expecting. The EIA will release its data today. Analysts expect the data to show that inventories fell from the previous week’s 8.99 million to 7.759 million barrels.
The EUR/USD pair declined as the market focused on the problems in Europe. The pair dropped to an intraday low of 1.0780, which was the lowest level since April 24. On the hourly chart, the pair appears to be forming a bullish engulfing pattern as shown below. Also, this price is below the 61.8% Fibonacci retracement level. Therefore, there is a likelihood that the pair will pare some of these losses as bulls attempt to retest the 61.8% retracement level at 1.0837.
The XBR/USD pair pared some of its earlier losses as the market remained optimistic about global growth. The pair is now trading at 31.50, which is closer to yesterday’s high of 32.40. On the four-hour chart, this price is above the 50-day EMA and slightly below the 38.2% retracement. Therefore, the pair may continue rising as bulls attempt to test the 38.2% retracement level at 34.37.
The hourly AUD/USD pair shows that the price found a strong support at the 61.8% Fibonacci retracement level at 0.6373. The pair then started moving upwards, forming a bearish flag and found resistance above the 61.8% retracement level at 0.6475. Earlier today, the pair moved below the support level of the flag and found support at the 50% retracement level. Therefore, this action means that two things may happen. First, a move below the 50% Fibonacci level of 0.6411 will lead to a continuation of the previous downward trend. Second, a move above 0.6475 resistance will likely lead to a new upward trend.