Euro turns lower after weak German data and Italian budget woes
The euro currency reversed course against the U.S Dollar on Tuesday after the German ZEW survey showed investor confidence towards the German economy fell sharply last month. The EUR/USD pair had initially started the new trading week supported by a renewed bid-tone following a strong weekly price close above the 1.1200 level.
The ZEW economic sentiment index declined to -2.1 during the month of April, widely missing market expectation of a +5.0 increase. Eurozone industrial production figures also declined by -0.3 percent on Tuesday, marking yet another monthly decline in industrial production, which continued to highlight the decline in the volume of production amongst factories and manufacturing inside the EU.
Geopolitical woes in Italy also came back to haunt the single currency on Tuesday, after Italian Deputy Premier Matteo Salvini said that Italy is prepared to break European Union rules in order to stimulate domestic employment. The populist coalition party deputy head said that he would be prepared to breach the EU deficit-to-GDP limit of three percent and the one-hundred and thirty percent government debt limit.
Italian bond yield quickly moved higher on Matteo Salvini’s comments, which gave financial markets a reminder that the problems surrounding the Italian economy could return this summer. The single currency may start to enter into a period of extended consolidation until the outcome of the European parliamentary elections is known.
The European Union’s twenty-eight member states are set cast their vote between May 23rd and May 26th to elect new European parliament representatives. Many European populists parties are expected to be elected into European parliament, which is likely to have an impact on the euro currency in the near-term.
EUR/USD Daily Mountain Chart | Source: ActivTrader
The EUR/USD pair remains technically weak on a short-term basis while trading below the 1.1300 level, bulls will need to break through the 1.1264 level to help improve the current sentiment towards the EUR/USD pair. To the downside, key support is now located at the 1.1190 and 1.1164 levels, with extended weekly support found at the 1.1100 level.
Written by Nathan Batchelor, External Analyst, ActivTrades
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