The Euro dropped towards 1.12 yesterday after German ZEW Economic Sentiment printed weaker than expected data, increasing fears of economic recession in the EU. On the other hand, the US reported a much better-than-expected June Retail Sales data, adding more pressure on the common currency, and diminishing the probability of a Fed rate cut by the end of the month. Nevertheless, the market still expects the Fed to cut rates by 25 basis points at July 31. However, that move has already been priced in. Therefore, the US Dollar could gain ground against the Single currency during the day ahead. In terms of macroeconomics, the EU will release its CPI numbers today, but the market expects no surprises in the data. Additionally, the US in its turn will publish the Building Permits numbers, if the results beat the forecast, it could push the Dollar even higher and the European currency to probably break below 1.12.
The Euro bears broke below 1.1245 support level and closed just above the 1.12 psychological level. The sellers are back in control as the buyers couldn’t find momentum to break above 1.1280, the trend line resistance. A small recovery to the upside is expected in today’s session before continuing its bearish move, probably breaking below 1.12 for the first time since May.
Support: 1.12 / 1.1185 / 1.1125
Resistance: 1.1245 / 1.1280