EUR/USD has been declining in June after failing to push above the resistance in May, and now fundamentals are aligning for further declines. The ECB delivered a rate cut in the last meeting and should continue to do so as the Eurozone economy weakens, despite a slight jump in EU inflation during May, with ECB policymakers already dismissing it.
EUR/USD Chart Weekly – The 100 SMA Likely to Be Broken![](data:image/svg+xml,%3Csvg%20xmlns='http://www.w3.org/2000/svg'%20viewBox='0%200%20800%20500'%3E%3C/svg%3E)
During April and May, EUR/USD was bullish after bouncing off the 100 simple moving average (green), but buyers failed to break above the 50 SMA (yellow) and after staying below that moving average for a few weeks sellers came back. However, they’re facing the 100 SMA again now, but the deterioration in Eurozone fundamentals should provide a break for EUR/USD.
Higher Eurozone Inflation CPI in May
The final CPI and core CPI figures for May are in line with the preliminary estimates, indicating that inflation in the Eurozone remains persistent. Headline inflation increased to 2.6% from 2.4% in the previous month, while core inflation, which excludes volatile items such as energy and food, rose to 2.9% from 2.7%. However, the ECB brushed off the numbers as temporary.
Weak Eurozone Economy
The Eurozone Flash Manufacturing PMI declined to 45.6 points, missing expectations of a slight increase to 47.9 points from last month’s 47.3 points, thus remaining in contraction territory. The Flash Composite PMI also saw a notable drop, falling to 50.8 points from 52.2 points in the previous month. Additionally, the Services PMI slipped to 52.6 points which is still in expansion, but the activity is still down from 53.2 points last month. This is a sudden deteriorations, induced by high ECB interest rates.
Political Landscape Shifting in Europe
The European Union elections earlier this month showed a shifting sentiment among the Europeans to the right. Now right spectrum parties are advancing in different European countries as well, which should be bearish for the Euro in the short term. France’s National Rally is maintaining its lead in opinion polls just over a week before the country’s emergency election, with one survey suggesting the far-right party might secure an outright majority in the next parliament. According to a poll released on Friday, the party, led by 28-year-old Jordan Bardella, garnered support from 33% of likely voters. National Rally outperformed the left-wing alliance New Popular Front, which received 28%, and President Emmanuel Macron’s movement, which stood below 20%.
EUR/USD Live Chart
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