EUR/USD has been on a bearish trend for a year now, since the reversal above 1.20 last summer. Inflation has been increasing in Europe and the ECB has started to raise interest rates, delivering a 50 bps hike last Thursday, but the FED is way ahead in this regard, preparing for the second 75 bps hike tomorrow. Today, the Conference Board consumer sentiment index fell, but despite that EUR/USD is reversing lower after failing to push above the 20 SMA (gray) on the daily chart.
The stochastic indicator is reversing after being overbought earlier, which points to further declines. This time, this pair will most likely fall below parity and stay there, unlike the last time, so we are watching this pair and will try to open another sell forex signal here after the winning signal last night.
I much prefer this index to the UMich survey, which is affected far too much by gasoline and equity prices.
“Consumer confidence fell for a third consecutive month in July,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The decrease was driven primarily by a decline in the Present Situation Index—a sign growth has slowed at the start of Q3. The Expectations Index held relatively steady, but remained well below a reading of 80, suggesting recession risks persist. Concerns about inflation—rising gas and food prices, in particular—continued to weigh on consumers.”
“As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.”
These numbers are from June when mortgage rates surged. They highlight some of the commentaries from home builders, which showed falling interest in buying new homes along with cancellations.
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