EURUSD and GBPUSD Extremely high inflation

• During the Asian session, the euro weakened against the dollar.
• During the Asian session, the pound continues to weaken due to the current strengthening of the dollar.
• Retail sales in Germany slipped more than expected in April.
• House prices in the UK continued to record double-digit annual growth in May.

EURUSD chart analysis

During the Asian session, the euro weakened against the dollar. Extremely high inflation in the euro area (+ 8.1% year on year compared to expectations + 7.7%) did not help the euro, declining purchasing power. However, the prospects for a turn in the ECB’s monetary policy are growing. The meeting between US President Joe Biden and Fed Chairman Jerome Powell yesterday was interpreted as a slight pressure on the head of the US Federal Reserve to hurry up with the tightening of US monetary policy in order to curb high inflation. Yields on long-term US bonds are rising again, supporting the US currency, which is growing in demand again. The euro is exchanged for 1.0720 dollars, representing the weakening of the common European currency by 0.11% since the beginning of trading tonight. We need to continue this three-day negative consolidation for the bearish option and withdraw below 1.07000 levels. After that, we can expect increased bearish pressure and the continuation of the EURUSD pullback. Potential bearish targets are 1.06500, then 1.06000 levels. For the bullish option, we need a return above the 1.07500 zone. After that, the pair could form a new higher high at 1.08000 and thus strengthen the bullish option.

GBPUSD chart analysis

During the Asian session, the pound continues to weaken due to the current strengthening of the dollar. The pair did not find support at 1.26000 but made a break below this support zone. The pound is now at the 1.25800 level, which is 0.16% lower than the beginning of trading last night. Additional support at this level is our MA200 moving average. For the bullish option, we need a return above the 1.26500 level, and after that, we can expect the pound to continue to recover. Our potential targets are 1.27000, then 1.27500 levels. We need a negative consolidation and pullback below the 1.25500 level and the MA200 moving average for the bearish option. After that, the pair seeks the next first support at the 1.25000 level. Breaking GBPUSD below this support zone would increase bearish pressure, and our potential lower targets are 1.24500, then 1.24000 level.

Market overview

Germany Retail Sales

Retail sales in Germany slipped more than expected in April due to a record drop in food sales, according to data released by Destatis on Wednesday. Retail sales fell 5.4 % on a monthly basis in April, reversing a 0.9 % rise in March. Sales are forecast to fall slightly by 0.2 %.

Traffic reached its lowest level since February 2021. Food turnover fell 7.7 % on a monthly basis, the biggest drop since the 1994 series began.

UK House Prices

House prices in the UK continued to record double-digit annual growth in May, driven by improvements in the labor market, data from the Nationwide Building Society showed on Wednesday.

House prices rose 11.2 % year-on-year in May after rising 12.1 % in April. However, the annual growth was faster than the economists’ forecast of 10.5 %.

On a monthly basis, house price inflation more than doubled to 0.9 % from 0.4 %. Prices are rising for the tenth month in a row.