The European currency managed to hold above the 1.11 yearly support on Friday, but the bias remains tilted to the downside amid US-Eurozone macroeconomic divergence. The US Q2 GDP grew more than expected while the recent downbeat Euro area manufacturing PMI reports increased the risks of a recession. The focus now shifts towards the EU Q2 GDP releasing this Wednesday along with the US FOMC meeting. Additionally, the pair remains pressured by the widening US-German 10-year yield differential, after the ECB signaled last week that it is likely to cut interest rates into negative territory and adopt more easing measures in September. On the other hand, the US Fed is likely to deliver a smaller rate cut this Wednesday favoring the US Dollar bulls.
The Single currency consolidated between 1.1150 and 1.11 levels during Friday’s session as the bulls and the bears are waiting for the break to either side to confirm the next possible destination. Price action remains weak, favoring the bears, as the sellers wait for the 1.11 break to push the common currency to new yearly lows. The bulls however, will attempt to break higher above 1.1150 to retest 1.1185 and the 50-day moving average.
Support: 1.1107 / 1.1050
Resistance: 1.1150 / 1.1185