The euro (EUR/USD) pair declined sharply on Tuesday as investors reflected on the relatively weak German sentiment data and the positive Eurozone retail sales numbers. It declined to 1.1830, which was the lowest level since Friday.
Eurozone retail sales data
The volume of retail sales in the Eurozone improved in May as the economy continued to reopen. According to Eurostat, retail sales rose by 4.6% in May after declining by 3.9% in the previous month. This increase was better than the median estimate of 4.4%. As a result, the volume of retail sales rose by 9.0% on a year-on-year basis, which was better than the median estimate of 8.2%.
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This growth was mostly because of a 8.8% increase in non-food products. The volume of automotive fuels increased by 8.1% as more people in Europe embarked on trips as countries lifted their lockdowns. The main laggard was food, drinks, and tobacco, whose volume declined by 0.2%.
Most countries in the Eurozone recorded strong retail sales in May. The best performers were France, Netherlands, and Estonia while Latvia, Finland, and Luxembourg were laggards.
The EUR/USD likely declined after the relatively disappointing German sentiment data by ZEW. The data showed that the country’s economic sentiment declined from 79.8 in June to 63.3 in July. The report said that the economic situation in the country has made some progress despite the decline. It said:
“The economic development continues to normalise. The situation indicator for Germany has clearly overcome the coronavirus-related decline. Although the sentiment indicator has once again fallen significantly, it is still at a very high level.”
The EUR/USD pair also declined after the relatively weak German factory order data. According to the country’s statistics agency, factory orders declined by 3.7% in May after rising by 1.2% in the previous month. This decline was mostly because of foreign orders, which declined by 6.7%. Domestic orders rose by 0.9%.
EUR/USD technical analysis
In my recent analysis on the EUR/USD, I pointed to a report by ING analysts who said that the pair would drop to 1.1800. Their prediction was right as the price declined to that level today. On the four-hour chart, it has moved slightly above the 78.6% Fibonacci retracement level. It has also declined below the 25-day and 50-day moving average, signalling that bears are still in control. Therefore, the pair will likely keep falling as bears target the next key support at 1.1750.
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