US-China trade concerns and European Parliament elections are the key themes this week ahead. On top of these, euro area preliminary PMIs, German ifo and ECB minutes among top-tier data/events to keep euro traders busy.

The auto tariff threat was delayed for 180 days to pursue negotiations, a relief factor to euro traders. Now focus remains on the European Parliament election, which will take place from May 23-26 as local macro data continue to deteriorate all eyes on this week’s Euro Area PMI data (Thu).

Danske Bank said, “The latest negative developments in the trade negotiations between the US and China could weigh on the PMIs and the German ifo print.”

In terms of macro data from last week, the ZEW Indicator of Economic Sentiment decline again. The decline in the ZEW Indicator of Economic Sentiment shows that the financial market experts continue to expect restrained economic growth in Germany for the next six months. The most recent escalation in the trade dispute between the USA and China again increases the uncertainty regarding German exports – a key factor for the growth of the gross domestic product,” comments  ZEW President Professor Achim Wambach.

The other data, 1Q GDP for German and EA grew as expected on top of these, the euro area annual inflation rate was 1.7% in April 2019.

Data review:

  • The ZEW Indicator of Economic Sentiment for Germany records a decrease of 5.2 points in May 2019 and now stands at minus 2.1 points. The indicator’s long-term average is 22.1 points, according to the official data.
  • The German economy grew 0.4% q/q in 1Q as expected.
  • The euro area annual inflation rate was 1.7% in April 2019, up from 1.4% in March 2019, according to the Eurostat.

Data preview:

The focus remains on the European Parliament election, which will take place from May 23-26. Data wise all eyes on this week’s Euro Area PMI data (Thu).

IHS Markit said, “Flash PMI surveys will also help determine whether a rebound in GDP growth will fade again in the second quarter. Any strengthening could see bond markets think twice about further stimulus from the ECB”.

Besides the ECB minutes from April meeting is uneventful.

 TECHNICAL ANALYSIS

The downward pressure remains on with the 200MA (Weekly) has been the key driver for EURUSD since November 2017 (Below chart).

EURUSD back at virtually unchanged levels, with the dollar index modestly higher. It has traced out a near-term price top near 1.1260 and another top near 1.1225 levels via the formation of a double top pattern. While the resulting downward stalled at the parallel support finds at 1.1135 below here, 1.1100 exists.

Caution will be order; if the pair does not rebound on these double top patterns, that will point to a new downward wave towards the support around 1.1050 and 1.1000 levels.

As discussed above, resistance levels are located at 1.1225 and 1.1260. Above these, 1.1325 are the key resistance to be a focus on.

The overall, trend remains bearish, and we are still waiting for a break below the level 1.1100 pay pave the way for lower prices back to 1.1050 its C point of the A-B-C corrective structure.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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