3 Jul 2013
Euro bears warming up
FXstreet.com (Edinburgh) - The shared currency is intensifying its weekly decline on Wednesday, finally breaking below the recent congestion pattern and testing 5-week lows at the same time in the boundaries of 1.2920.
Vulnerability everywhere
The mixed results from both manufacturing and services PMI prints in the euro area have started to erode the recent shine in the EUR/USD after the recent late May-mid June escalate, where the pair tested highs above 1.3400 the figure. It is worth recalling that the late upbeat mood in the euro traders stems from the June’s ECB gathering, where the tone was somehow less dovish than expected. However, in the past weeks two fronts portending headwinds for the single currency has re-opened in Greece – via its reluctance to comply to austerity measures – and in Cyprus – where the need for another bail-out or a re-schematics of the previous one is awaking dormant jitters.
Although the chatter involving negative rates has diminished, ECB officials reminded the FX community that the central bank keeps that instrument in its toolbox, just in case things get worse. In light of tomorrow’s meeting, Draghi’s tone is expected to be in the dovish side, although a point of interest remains whether the ECB President acknowledges the recent improvement in some EMU indicators, pointing to keep alive the hopes of a recovery in the bloc during the second half of the year. In a rate-wise sense, market consensus expects the refi rate to remain unchanged.
In the technical space, the pair is trading below the up-trend support line from May lows, which penetrated on Tuesday and is flirting with the area around 1.2930, where converge the 55-week moving average and the up-trend support line from July lows (weekly chart). Further downside impulse will target May low at 1.2796 ahead of 2013 low at 1.2740 (April 4th). On the upside, the initial hurdle remains at the psychological threshold at 1.3000, reinforced by the 61.8% Fibonacci retracement of the April-June ascent at 1.3002 ahead of the 50% retracement at 1.3082.
Vulnerability everywhere
The mixed results from both manufacturing and services PMI prints in the euro area have started to erode the recent shine in the EUR/USD after the recent late May-mid June escalate, where the pair tested highs above 1.3400 the figure. It is worth recalling that the late upbeat mood in the euro traders stems from the June’s ECB gathering, where the tone was somehow less dovish than expected. However, in the past weeks two fronts portending headwinds for the single currency has re-opened in Greece – via its reluctance to comply to austerity measures – and in Cyprus – where the need for another bail-out or a re-schematics of the previous one is awaking dormant jitters.
Although the chatter involving negative rates has diminished, ECB officials reminded the FX community that the central bank keeps that instrument in its toolbox, just in case things get worse. In light of tomorrow’s meeting, Draghi’s tone is expected to be in the dovish side, although a point of interest remains whether the ECB President acknowledges the recent improvement in some EMU indicators, pointing to keep alive the hopes of a recovery in the bloc during the second half of the year. In a rate-wise sense, market consensus expects the refi rate to remain unchanged.
In the technical space, the pair is trading below the up-trend support line from May lows, which penetrated on Tuesday and is flirting with the area around 1.2930, where converge the 55-week moving average and the up-trend support line from July lows (weekly chart). Further downside impulse will target May low at 1.2796 ahead of 2013 low at 1.2740 (April 4th). On the upside, the initial hurdle remains at the psychological threshold at 1.3000, reinforced by the 61.8% Fibonacci retracement of the April-June ascent at 1.3002 ahead of the 50% retracement at 1.3082.