European Economy Overview

The current eurozone inflation rate surged to 7% last month from 6.9% in March, which remains higher than the European Central Bank's (ECB) medium-term target of 2%, but core inflation, excluding volatile food and fuel prices, unexpectedly slowed down.

Foreign prices for raw materials, metals, and some foods are likely to fall dramatically, and a drop of 70% or 80% compared to last year will signal that consumer costs have begun to actually fall gradually.

However, Europe cannot currently avoid the prospect of rising tensions between China and the US. China has made attempts to strengthen ties with Europe and continues to rely on European investment, particularly German investment, which may result in a push to set the European trade agenda.

German firms are increasingly investing in China. It has garnered support from the German government, the European Union, and the G7, which acknowledge the importance of commercial relations with China, including the desire to limit risks that may arise, while US corporations attempt to exit.

However, German exports to China decreased at the start of the year since China's recovery is still slow. Between January and March, total German exports climbed by 7.4%. Exports to China declined 12.0% year on year. While German exporters' confidence is returning, it is mostly owing to anticipation that demand from China will improve.

The French economy is likely to rise marginally in the second quarter compared to the previous quarter, owing to higher industrial activity in April, notably in the services and construction sectors, than in March. In May, service sector activity is projected to stay constant while industry and construction activities will fall.

Meanwhile, the Italian economy expanded by 0.5% in the first quarter, a faster-than-expected comeback following a modest dip late last year. However, Italian industrial output was weaker than projected in March, marking the third consecutive month of contraction due to decreased output of consumer goods and energy, with a further contraction expected in April due to a steep decline in production and new orders.

After hiking interest rates by 25 basis points to 3.25% last week, ECB officials have stated that the next rate hike will be lower. Rates are predicted to peak in June or July in line with inflation data, with the ECB's policy remaining tight for some time to come because the bank is still committed to bringing inflation down to 2% by 2025 or maybe the end of 2024 and is likely to begin to cut rates during 2024.

The US dollar pair rose in early European trade on Thursday after dipping overnight on US consumer inflation data that declined marginally in April, indicating that the US Federal Reserve's tightening cycle may be nearing its end. While the decline has been constrained by uncertainties about the US debt ceiling and defaults that might harm the global economy. As a result, the euro's downward tendency may be limited to some extent at this point.

Data for Technical Analysis (5H) CFD EUR/USD

Resistance : 1.0921, 1.0923, 1.0927

Support : 1.0913, 1.0911, 1.0907                              

5H Outlook

1H Outlook

Source: Investing.com                    

Buy/Long 1 If the support at the price range 1.0908 - 1.0913 is touched, but the support at 1.0913 cannot be broken, the TP may be set around 1.0922 and the SL around 1.0905, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.0921 - 1.0926, TP may be set around 1.0933 and SL around 1.0909, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.0921 - 1.0926 is touched, but the resistance at 1.0921 cannot be broken, the TP may be set around 1.0912 and the SL around 1.0929, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.0908 - 1.0913, TP may be set around 1.0901 and SL around 1.0925, or up to the risk appetite.       

Pivot Points May 12, 2023 02:15AM GMT

Sources: Investing 1, Investing 2