Selling EURUSD if data on inflation in Germany is weak

The European Central Bank this year has repeatedly announced plans to cut interest rates as inflationary pressures in the Eurozone economy are easing. June is approaching and the ECB's plans are becoming more concrete.

This week, the European Central Bank representative Francois Villeroy de Galhau said the regulator should not rule out lowering borrowing costs at both its June and July meetings.

Villeroy told Germany’s Boersen-Zeitung newspaper that he favors “maximum optionality”after the June deposit rate cut.

While most policymakers agreed on June, they’re generally reluctant to commit to a path beyond that as wage gains’ and services inflation prove sticky, Middle East tensions threaten to boost energy prices and US rate cuts are delayed.

This caution is also evident in markets. They’ve pared bets on monetary easing this month and now only fully price two quarter-point reductions in 2024 — down from three before. They see no change in July.

Villeroy said the ECB has “significant room” to loosen toward a neutral setting that’s thought to be between 2% and 2.5%.

However, speaking Monday in Dublin, ECB Chief Economist Philip Lane said the ECB isn’t committed to “any particular speed” of rate reductions. He reiterated that officials “will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction at each meeting.”

Such marker data are the CPI values of the leading eurozone economies. Just tomorrow, Germany's May CPI values are expected to be published.

If the actual data is equal or lower than the forecasted values, it will be a strong downward impulse for EURUSD.

The EURUSD downward movement is also indicated by the bearish divergence of the price with the RSI indicator.

The final recommendation is to sell EURUSD if the actual German CPI is equal or lower than the forecasted values.

The profit could be fixed at the level of 1.0815. The Stop-loss could be placed at the level of 1.0920.

It’s suggested to limit the trading volume to no more than 2% of your deposit funds.