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On Monday, the EUR/USD pair is trading sluggishly around the 1.1340 area, dipping lower in sympathy with a sharp fall in the GBP/USD major. The dollar index was trading at 94.199, up 0.18% from its previous close of 94.029.
Last week, the pair reversed from 2-1/2 month lows and moved sharply higher on Friday, after disappointing May headline Nonfarm payrolls data and weaker-than-expected US ISM non-manufacturing PMI numbers. The world’s largest economy added just 38,000 new jobs last May, the slowest in six years and much below analysts’ expectations of around 160,000. The unemployment rate fell to 4.7%, the lowest since 2007, whilst wages posted a modest growth.
Additionally, the latest ISM Non-manufacturing PMI dropped to 52.9 in May from the previous month’s 55.7 – well below expectations and the lowest in two years. These data readings have cast serious doubts on the economic recovery and introduced uncertainty over when the Federal Reserve might hike interest rates. Within minutes of Friday’s release, the US dollar took its biggest beating of the year, collapsing 1.6 per cent to a three-week low against a basket of currencies.
Today at 1:00 EDT, the release of German factory orders reported a decline in April as demand for investment goods from outside the Eurozone slumped. Orders fell 2% from the prior month, compared with economists’ forecast for a drop of 0.4%. But according to analysts, the drop was more of a counter-movement to rather strong figures from March, thus the underlying trend in orders is more or less unchanged and this news does not seem to have affected the market.
The key focus today would remain on the Fed Chair Janet Yellen’s speech in Philadelphia later today during the NY session. Yellen is due to provide the final hints on the economic outlook and monetary policy of the US central bank before its June meeting. Despite the looming ‘Brexit’ concerns and weaker employment report for May, Yellen is expected to maintain the hawkish tone and keep doors open for a near-term Fed rate-hike. However, it seems unlikely that her words will affect the market’s negative sentiment towards the dollar. Overall, the macroeconomic calendar will be light this week, with attention shifting towards June 15th FOMC meeting.
Fig. EURUSD D1 Technical Chart
On the daily chart, we can see the single currency has abandoned the area of recent highs against the dollar, taking EUR/USD back to 1.13590. RSI (14) remains above the average at 58.18, showing that the bullish power is still dominant. The stochastic is approaching the overbought zone, with %D line catching up with %K line. The pair is expected to climb further.
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