In the past one month, the EUR/USD pair has declined by more than 4%. The decline is associated with the decline in the European fundamentals and a strong dollar. In that duration, the dollar has gained by almost 3.5% mostly because of a hawkish Federal Reserve. The EUR/USD pair is now trading at 1.17000.
Yesterday, the pair accelerated the decline after data firm IHSMarkit released the PMI data for Europe. The data, which shows the sentiment among purchasing managers, fell to the lowest levels in one year. The decline in the sentiment could be because of the ongoing tussles about trade.
In the evening, President Trump doubled down by launching an investigation that would put a 25% tariff on imported cars. This will bring increased uncertainties especially from European countries that have grown increasingly frustrated by their transatlantic partner.
Another reason why the euro has been subdued is Italy, which went to an election a few months ago. Yesterday, the two populist parties that won the election were given a go ahead to form a government. The two parties promised to decrease the number of immigrants and also exit the euro. They have talked about starting their own currency. This is a difficult period for the euro because Italy is the bloc’s fourth largest economy.
The pair has reached 1.1700, which provides an important support. The level is also in line with the pair’s 25-day moving average and slightly lower than its 50-day SMA. The pair’s SMA is currently at 42, which implies that the pair could have some more declines to do. This could see the pair test the 1.1600 level which provides another support.