EUR/USD Tests the Lows as German Consumers Falter

Last week, the USD closed with marginal gains, although overall it was a rather uneventful period. Friday brought encouraging US manufacturing and services PMI figures, showcasing growth without signs of inflationary pressures. In contrast, the EUR faced selling pressure after disappointing Eurozone PMI data, but these losses were reversed early this week.

Technical Analysis: EUR/USD

EUR/USD daily chart showing 100 SMA under threat On the weekly chart, EUR/USD has been consolidating within a range of 1.06 to 1.10 throughout 2024, with both buyers and sellers attempting to establish momentum above or below these levels. This range is delineated by the upper 50-week Simple Moving Average (SMA) and the lower 100-week SMA.

Last week’s price action formed a doji candlestick, suggesting a potential reversal upwards, especially with the 100 SMA continuing to provide support. However, market participants are cautious ahead of the US PCE inflation data due later this week, which could dictate price movements unless there are significant developments from the Eurozone.

German July GfK Consumer Sentiment

Germany’s GfK consumer sentiment for July is currently at -21.8 points, falling short of the anticipated -18.9 points. June’s consumer sentiment was revised slightly downwards to -21.0 points from an initial -20.9 points. This decline halts a four-month period of improving consumer confidence.

GfK's Statement

GfK remarked that the halt in the upward trend signifies the difficulty of the recovery path and the potential for setbacks in overcoming sluggish consumption. They emphasized that while there had been a gradual improvement in consumer confidence, sustaining this momentum will require overcoming significant obstacles, such as high interest rates set by the European Central Bank (ECB).

These elevated interest rates can dampen consumer spending and borrowing, making it harder for households to feel optimistic about their financial futures. Additionally, external economic factors, such as global supply chain disruptions and energy price fluctuations, could further strain consumer sentiment. Overall, the report highlights the precarious nature of the economic recovery and the need for targeted policies to support consumer confidence and spending.

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