The week was pretty huge for the euro in terms of economic data. First we had the Spanish manufacturing PMI announced on Monday. The number came in worse than the ones for and that send the euro lower against its American counterpart.
Yesterday, figures about European services’ sector were released as well as the retail numbers on a month over month basis. Both figures came in better than expected with the services sector still in contraction, but a much less severe than the one analysts were projecting. Retail sales came in at 0.6%, a reading three times as high as the one economists were pricing in. May retail sales, however, were revised to –1.4% from a previous reading of –1.0%.
All this positive data was met with skepticism by market participants, who continued selling the common currency ahead of the ECB’s policy statement that was scheduled to be released on Thursday. The EUR/USD started the session around the key 1.2600 level and declined for the better part of the session, pushing below its 25-period, its 50-period and its 200-period moving averages to end the session very close to the lows for the day at 1.2501. Market participants grew increasingly pessimistic about the future of the Eurozone and chose to shed their holdings in the common currency.
Today, the EUR/USD dropped sharply after a slew of economic data was released in the market.
First the Spanish government announced the results of its auction of three-, five- and ten-year bonds. The proceeds of the auction were in the upper end of the targeted range, but the yields on the benchmark ten-year bond were higher than the ones in the previous auction. That, however, was not the news everyone was focusing their attention at. What was attracting investors’ attention was the European Central Bank’s monetary policy statement. The central bank chose to lower its key minimum bid rate by a quarter of a percentage to 0.75%. It also lowered its deposit rate to 0, trying to get banks in the region to lend their excess deposits at the market overnight interbank rate, which is currently standing at 0.3%. All these news had a negative effect on the euro, which posted fresh new lows against the U.S. dollar. The common currency is currently changing hands at 1.2385 dollars, after touching rates of 1.2360 earlier on. We are currently below the lows we reached on June 28th and we are moving towards the lows of June onset. Those lows, which are around 1.2300, are providing support for the currency pair, but they might not present a big challenge to the bears if the selling intensifies. Resistance, on the other hand, is provided by the last week’s lows around 1.2400. Oscillators are all trending lower with the relative strength index at 27 and the stochastic at 7. Both of these indicators are in oversold territory. The MACD retracted from the highs it reached last week and has just moved below the key 0 level.
Traders, who want to put their money in the EUR/USD are advised to watch tomorrow’s economic announcements, which will probably have a significant effect on the currency pair. For the European economy German industrial production will be released around 10:00 GMT. But what investors will be eyeing is the employment data for the U.S. economy. Non-farm employment change and unemployment rate are announced at 12:30 GMT. Average hourly earnings on a month over month basis are also scheduled to be released at that time.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.