Euro Rally Hits A Wall

By MarketPulse (Kenny Fisher)ForexMay 25, 2022 09:55AM ET

www.investing.com/analysis/euro-rally-hits-a-wall-200624855

Euro Rally Hits A Wall

By MarketPulse (Kenny Fisher) | May 25, 2022 09:55AM ET

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Euro falls sharply

The euro has reversed directions on Wednesday and is sharply lower. In the European session, EUR/USD is trading at 1.0663, down 0.67% on the day. The euro was up 1.29% on Monday and extended its gains on Tuesday, hitting a 4-week high, after ECB President Lagarde announced that the ECB would raise interest rates in July.

On the data front, there weren’t any surprises out of Germany. GDP in Q1 rose by 0.2% QoQ, as expected. Compared to Q4 of 2019, the quarter prior to the COVID-19 pandemic, growth was 0.9% smaller, which means that the economy is yet to fully recover from the COVID crisis. The war in Ukraine and COVID-19 have resulted in supply chain disruptions and accelerating inflation, which has hampered economic growth.

German confidence remains in deep-freeze

German GfK Consumer Sentiment came in at -26.0 in May, a slight improvement from the April reading of -26.6, which marked a record low. Not surprisingly, consumers put the blame for their deep pessimism on two key factors – the conflict in Ukraine and spiraling inflation. The GfK survey also found that consumer spending has weakened, as high costs for food and energy have reduced spending on non-essential items.

The ECB Financial Stability Review, published twice a year, echoed what German consumers are saying. The report bluntly stated that financial stability conditions have deteriorated in the eurozone, as the post-COVID recovery has been tested by higher inflation and Russia’s invasion of Ukraine. The report noted that the economic outlook for the eurozone had weakened, with inflation and supply disruptions representing significant headwinds for the eurozone economy.

Given this challenging economic landscape, the euro will be hard-pressed to keep pace with the US dollar.

EUR/USD Technical

There is resistance at 1.0736 and 1.0865
EUR/USD is testing support at 1.0648. The next support line is at 1.0519

EUR/USD Daily Chart

The U.S. Dollar is one market that continues to stand out as a stronghold for traders and investors. The world's primary reserve currency, the USD, remains solidly above all other...

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Central Banks

Interest Rates

Next Meeting

FED

1.75%

Jul 27, 2022

ECB

0.00%

Jul 21, 2022

BOE

1.25%

Aug 04, 2022

SNB

-0.25%

Sep 22, 2022

RBA

1.35%

Aug 02, 2022

BOC

1.50%

Jul 13, 2022

RBNZ

2.00%

Jul 13, 2022

BOJ

-0.10%

Jul 21, 2022

CBR

9.50%

Jul 22, 2022

RBI

4.90%

Aug 04, 2022

PBOC

3.70%

BCB

13.25%

Aug 03, 2022

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Euro Rally Hits A Wall

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