Data indicating a sharp slowdown in the German manufacturing sector, which is experiencing a clear recession, as well as a revision of the forecasts of the European Commission for the worse, and are putting pressure on the European currency, which is gradually declining in the pair with the US dollar.
If the soft monetary policy of the eurozone supports domestic demand in Germany, the problems with foreign trade remain at a high level, which creates additional downward risks for the manufacturing sector.
In today's report, the Federal Bureau of Statistics of Germany stated that orders in the manufacturing sector of Germany in March 2019 increased by 0.6% compared with the previous month, while economists had expected an increase of 1.2%. But compared to March 2018, orders decreased by 6.0% at once.
Today's report of the European Commission also disappointed investors who expect to continue the upward correction in the euro, which was quite expected, given the macroeconomic indicators in the 1st quarter of this year. Most likely, it is for this reason that the euro slightly slipped in pair with the US dollar.
According to the new forecasts, the eurozone GDP is expected to grow in 2019 at 1.2% against the previous forecast of 1.3%. The European Commission also forecasts GDP growth in the eurozone in 2020 at 1.5% against the previous forecast of 1.6%.
As for inflation, the situation is slightly better. It is still expected to grow at 1.4% in 2019, while inflation in the eurozone in 2020 will be at 1.4% against the previous forecast of 1.5%.
The expectations of the labor market as a whole were very optimistic, which should spur inflationary pressure. The report of the European Commission stated that unemployment in the eurozone in 2019 will be 7.7% against the November forecast of 7.9%. In 2020, the unemployment rate is expected to be at 7.3%, against a forecast of 7.5%, which was published in November last year.
In general, the conclusions of the economists of the European Commission are quite straightforward. The main downside risks to economic growth are directly tied to US protectionism and trade duties. Also, the slowdown in economic growth in the eurozone is due to the deterioration of the situation in world trade and uncertainty with Brexit, as the UK's exit without an agreement will further weaken the already sluggish economic growth of the eurozone this year.
As for the technical picture of the EURUSD pair, it remained unchanged, except for the fact that the buyers of risky assets missed the large resistance level of 1.1220.
Bears can show themselves at the breakdown of a large support 1.1180, which will attempt to build the lower border of the new upward channel in order to test the lows of April this year in the area of 1.1110. Buyers still want a refund and a break above 1.1220 resistance that will allow you to "pull over" to their side and will open the way to the area of the highs of 1.1260 and 1.1320.
The material has been provided by InstaForex Company - www.instaforex.com