Yesterday, the euro fell against the US dollar after weak reports on the eurozone economy, whose current account surplus has once again declined. The British pound also began to gradually decline in the pair with the dollar. Many traders and investors do not yet believe that the future meetings of the British Prime Minister with representatives of the EU on the topic of Brexit will bring success.
According to the European Central Bank, the current account surplus of the eurozone balance of payments in June this year fell to 18 billion euros from 30 billion euros in May. The total positive balance for the 12 months to June this year amounted to 318 billion euros. This is about 2.7% of the eurozone GDP. It is worth noting that last year, over the same period, the total surplus amounted to 391 billion euros. US trade duties and protectionist policies are affecting such indicators, where the situation will only worsen in the future. Let me remind you that the current account of the balance of payments is a general indicator of the international financial situation of the country.
Yesterday's data on consumer price inflation in the eurozone further strengthened traders' confidence that the European Central Bank will go to adjust interest rates in the autumn of this year, which will further weaken the position of the European currency. According to data, in July this year, inflation in the eurozone remains far from the target level set by the ECB. The report states that in July, compared with the same period last year, consumer prices rose by only 1%, while the first estimate showed an increase of 1.1%. Let me remind you that the annual inflation target is just below 2%. The decline was due to falling prices for industrial goods and energy.
Another criticism of US President Donald Trump against Fed Chairman Jerome Powell was ignored by market participants. The US President has already made it a rule to criticize the Fed's work on the eve of the next expected speech of the head of the Central Bank. In his Twitter, Trump noted that the US economy is very strong, despite the lack of vision of the head of the Fed, but interest rates should be reduced by at least 1.0% in a fairly short period. The US President also noted that he expects a return to the quantitative easing program, which the European Central Bank can now resort to.
Yesterday, the President of the Federal Reserve Bank of Boston Eric Rosengren also spoke, who expressed a different point of view on the current situation. Unlike the US President, Rosengren said that the state of the economy is still very good and the Fed should not soften policy too much in the absence of serious problems, as the lowering of rates has a price. However, he also pointed out that the committee should be aware of the risks to financial stability and pursue its policies regardless of the political situation.
As for the current technical picture of the EURUSD pair, it seems that the sellers of the euro hurried yesterday to fix profits after the release of weak reports, but the situation remains on the side of the bears. The next goal will be to update the lows of the previous week with the test of support levels of 1.1060 and 1.1030. If the bulls attempt to build an upward correction in the pair, it is best to consider short positions in the trading instrument from the upper border of the side channel of 1.1120. A larger resistance level is the area of 1.1160.
The British pound "digested" the next rumors about the possibility of a vote of no confidence in Prime Minister Boris Johnson and after a small upward correction again headed for a decline. Also, the further direction of the pound will be influenced by the result of meetings of Prime Minister Boris Johnson with EU leaders, which are scheduled for this week. A good result should not be expected, so any negative news for the pound will once again strengthen the bearish trend.
From a technical point of view, the support breakthrough in the area of 1.2090 will increase the pressure on GBPUSD, which will open a real prospect for the return of the trading instrument to the area of lows 1.2040 and 1.1980. Also, a breakout of 1.2090 support will lead to a breakthrough of the lower limit of the current upward channel, which is a bad signal for buyers.
