On Friday Europe’s data was worse than expected estimated and expected correction was not observed. The price broke the bottom testing level and the euro dropped 53 points. German Trade Balance was 17.6 billion euros vs. forecast for 18.0 billion euros. Industrial Production in Italy fell 0.8% vs. estimates for -0.2%. Spanish 10-year yields rose last week for the first time in 6 weeks after declining to a 3-year low of 3.94% on May 3. On Friday Federal Reserve Bank of Chicago President Charles Evans said the US job market is “doing better” thanks to record policy stimulus, while adding that he wants to see employment gains continue through the summer. Evans was an early advocate of trying the Fed’s zero interest rate policy to economic indicators, a move that the FOMC adopted in December. He also voiced support early for the Fed’s current round of bond buying known as quantitative easing.
Within a couple of days we expect the euro will be on the support of trendline of the daily chart 1.2725.
Today euro-area finance ministers meet (Eurogroup), tomorrow the Economics and Finance Ministers will gather (ECOFIN).
However, the correction may be observed if the market responds to data on Industrial Production in China which is estimated to rise 9.4% in April vs. 8.9% in March. Retail Sales in China is expected to be 12.8% vs. 12.6%. Positive data on China is more likely as Trade Balance published last week surpassed the expectations, moreover domestic demand rose as well.
Data on US Retail Sales (issued at 16:30 GMT+4) is expected to rise. Retail Sales in April is forecast to drop 0.3% vs. -0.4% in the previous month; Retail sales Ex-Auto is estimated to be -0.1% vs. -0.4% in March.
However, currently the euro may be in inverse correlation to the stock market if published data influence the stock indices rise, the euro may drop along with investors’ idea that the dollar gains amid positive news. This issue may be solved by means of technical methods, if the price overcomes the testing level 1.3001 and comes out the resistance of trendline on the H4, the bullish target 1.3053 (the low of April 30 and May 6) opens; if the price consolidates under the testing level 1.2954, bearish target 1.2903, support of the trendline on the H4, opens. Then 1.2853, the level of interjection of thendlines on the H4 coinciding with the support on the daily chart, opens.
