European Currencies Adjust to Support Levels: Is Growth Possible?

A week rich in macroeconomic data contributed to the decline of the euro, yen, and pound. Notably, the following events were significant:

• Inflation falling for the second consecutive month (0.2% against the expected 0.3%);
• The publication of the updated forecast from the Federal Reserve (one reduction in the federal funds rate by 0.25%, presumably in September).

Nonetheless, despite the hawkish stance of the Federal Reserve and the steady slowdown in inflation, European currencies managed to stay above key levels relative to the dollar, even laying the groundwork for forming reversal patterns.

GBP/USD

According to the technical analysis of the GBP/USD pair on the daily timeframe, a “piercing candle” pattern was formed yesterday. If the pair closes with any bullish candle today, the price might reach recent highs around 1.2860-1.2810. A resumption of the downtrend is possible with a confident hold below 1.2650. The following news might impact GBP/USD pricing:

• Today at 15:30 (GMT +3:00) the US core retail sales index for May;
• Today at 15:30 (GMT +3:00) the US retail sales volume;
• Tomorrow at 09:00 (GMT +3:00) the UK consumer price index (CPI) for last month.

EUR/USD

Technical analysis of the EUR/USD pair suggests a potential corrective rise towards 1.0800, provided the “bullish engulfing” pattern formed yesterday is realised. If the price falls below 1.0660, a retest of the April low around 1.0600 is possible. Today, important macroeconomic data from the eurozone is expected:

• At 12:00 (GMT +3:00) the ZEW economic sentiment index for the eurozone;
• At 12:00 (GMT +3:00) the eurozone consumer price index (CPI).

Experts forecast a rise in these indices, which may support the strengthening of EUR/USD.

Also important for EUR/USD pricing will be the scheduled speech by the Vice-President of the European Central Bank, Luis de Guindos, at 16:30 (GMT +3:00).

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