EURUSD drop could signal turning point ahead of Fed rate decision

The EURUSD pair declined slightly after Germany released weak industrial production data. Investors are also staying focused on the upcoming interest rate decision by the Fed after the positive jobs data from the US.

German industrial production disappoints

Germany, a highly industrial country is struggling. According the Federal Statistics Office, the country’s industrial production declined by 17.9% in April. It dropped by 25.3% on an annualised basis. The decline was worse than the March decline of 8.9%.

The office blamed the weakness to the coronavirus pandemic and the accompanying lockdown. This decline was mostly because of a 74.6% decline in the automotive industry. Intermediate goods fell by 13.8% while consumer goods declined by 8.7%.

In recent weeks, the automotive industry, which employ millions of people directly and indirectly, has been lobbying the government for a large stimulus package.

Focus on the Fed

The EURUSD is now focused on the Federal Reserve, which will deliver its interest rate decision on Wednesday. This decision will be important because of the jobs data that came out on Friday. The data showed that the US economy created more than 2.5 million jobs in May.

Analysts were caught off guard because they were expecting the economy to shed more than 8 million jobs. These better jobs data could see the Fed be more hesitant to provide more stimulus in the meeting. Instead, analysts expect the bank to leave rates unchanged.

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EURUSD technical outlook

The EURUSD pair declined to an intraday low of 1.1285, which was lower than the Friday’s high of 1.1380. On the daily chart, the price is significantly above the 50-day and 100-day exponential moving average. The RSI, which is an important oscillator is still at the overbought level while the price is below the 78.2% Fibonacci retracement level. The pair may continue declining, as bears attempt to move below 1.1200 ahead of the Fed meeting.

On the flip side, a move above the Friday’s high of 1.1380 will send a signal that there are more buyers in the market. These buyers will be interested in moving above the important resistance of 1.1495.

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