Euro traders will be watching the release of Eurozone confidence data before this week’s ECB rate decision. fluctuation may be relatively low upon the release as investors are probably feeling hesitant in committing capital prior to the central bank’s decision and outlook. The utility in the data lies in the fact that a worsened or at-forecast print will say a lot about consumers’ outlook and the impact it may have on growth.
When consumers are more optimistic about the future, their spending habits become more aggressive because they believe the purchases they make will not put them in a financially bad situation. However, if confidence is low due to a bad outlook ahead, purchasers may curtail their spending in anticipation of hard times ahead and may favor a higher saving-to-spending ratio.
Likely by no sheer coincidence, Eurozone year-on-year retail sales data is now at its weakest point since January, and consumer confidence is currently put at -7.2. The ECB has acknowledged that risks and inflation have been tilted to the downside in light of Brexit and slower global growth against the backdrop of the US-China trade war. Overnight index swaps are pricing in a 49 percent probability of a cut this week.
EURUSD TECHNICAL ANALYSIS
After briefly touching resistance at 1.1275 (yellow dotted line), EURUSD subsequently retreated and is now timidly hovering above 18-month former-resistance-turned-support (red channel). Barring any sudden major developments, EURUSD may not make any major moves until the ECB rate decision. The fundamental outlook suggests the pair will capitulate and trade below the channel and the ECB may be the catalyst for it.