Image Source: Unsplash
 

EUR/USD rises despite weak German factory orders & ahead of Eurozone retail sales. Oil falls despite Saudi output cuts, as global macro backdrop weighs.
 

EUR/USD rises despite weak German factory orders & ahead of eurozone retail sales

• German factory orders fall -0.4% MoM
• EZ retail sales are set to rise by 0.2%
• EUR/USD struggles below 200 sma

Yeah U.S. dollar is pushing higher amid A weaker U S dollar and despite weaker-than-expected German factory orders. Orders fell by -0.4% MoM in April after plunging 10.9% in March. The data adds to fears that Germany’s recession could be extended into the second quarter of the year.

Looking ahead, attention now turns to the Eurozone retail sales data, which is expected to show that sales grew by a lackluster 0.2% MoM in April, after falling -1.2% in March. Weak sales highlight the pressure that consumers are under as inflation remains above the ECB’s target 2% level.

The data come after ECB President Christine Lagarde said yesterday that price pressures remain strong and that borrowing costs will be raised further in order to bring inflation down. She added that the impact of previous interest rate hikes is still materializing.

No ECB officials will speak today. However, the central bank’s consumer expectations survey is due to be released.

Meanwhile, the USD is edging lower as investors continue digesting weaker-than-expected service sector data from the US. The ISM services PMI showed that activity unexpectedly stalled in May at 50.3, down from 51.9 in April and defying expectations of an increase to 52.2. The data fuel concerns over a hard landing in the US and saw the market readjust Fed rate pause expectations. The market is now expecting a 74% probability that the Fed will pause rate hikes in June.
 

EUR/USD outlook – technical analysis

EUR/USD rebounded from a 10-week low of 1.0635 and broke out of the upside of a month-long descending channel. However, the price hit resistance at the 200 sma limiting the upside. This, combined with the 20 sma crossing below the 100 sma and the RSI below 50 keeps sellers hopeful of further downside.

Sellers will look for a break below 1.0675 to test 1.0640, the May low, ahead of the 1.06 round number.

Meanwhile, the 200 sma at 1.0780 is the level that buyers will look to cross ahead of 1.0820, the confluence of the 20 and 100 sma.

(Click on image to enlarge)

Oil falls despite Saudi output cuts, as global macro backdrop weighs

• Saudi Arabia announces 1 million barrel per day production cut
• Weak US data raises recession worries
• WTI rebounds lower from 50 sma

Oil prices are falling, pulling back from the multi-day high reached on Monday after news that Saudi Arabia will voluntarily cut output by 1 million barrels a day boosted the price. While oil had jumped in early trade on Monday following the weekend OPEC+ meeting. However, the gains were short-lived as concerns over the global macroeconomic backdrop and recession worries pulled the price lower.

Downbeat US services PMI data raised concerns over the economic outlook and, therefore the demand outlook in the US, the world’s largest oil consumer. That said, signs that the Fed could pause rate hikes could pull on the USD and offer some support to oil prices.

The weaker US data contrasts with the stronger-than-expected Caixin services PMI from China, the world’s largest importer of oil. China’s demand is expected to be a positive market driver across the second half of the year. However, the country’s recovery from the pandemic is proving to be bumpy.

Looking ahead, the API inventory report later today could be the next catalyst. The data revealed a 5.2 million barrel build in the previous week. High inventory levels again this week could raise concerns over the demand outlook in the US as driving season ramps up.
 

Oil outlook – technical analysis

Oil continues to trend lower, forming a series of lower highs. The 50 sma capped yesterday’s rise, which along with the long upper wick supports the view that there was little demand for oil at the higher prices.

Sellers will look for a move below 70.00 round number ahead 67.00, the May 31 low. A break below here opens the door to 63.60 the May low.

Meanwhile, buyers will look for a rise above the 50 sma and yesterday’s high at 74.80 to create a higher high and bring 78.85, the April 24 high into play.

(Click on image to enlarge)

More By This Author: