EUR/USD: 1.2363
It has been another overall negative day for the Euro, testing a new 2 year low – so far at 1.2336 – as Spain continues to weigh on markets. Fitch downgraded 8 Spanish regions and the general public seem to have decided en masse to move their savings out of their accounts with BOS data showing that €66.2bn was sent overseas last month, the most since records began in 1990.
Elsewhere the latest polls in Greece are showing little clarity as to any clear winner in the upcoming election which is only adding to the general confusion in the EU.
On the economic front, - Inflation across the EU dropped to a 15-month low in May, to 2.4% from 2.6% in April. German unemployment dropped to 6.7% in May from 6.8% April, and in Greece retail sales collapsed by 16.2% in March.
Ireland has been voting in the referendum on the EU fiscal pact. There is no result at present, but a "yes" vote to go with the austerity pact, is expected.
The ECB head, Mario Draghi has been speaking today and sounded rather pessimistic about the prospects of the EU and the Euro, indicating that the current state of affairs is not sustainable. This was backed up by similar comments from EU Commissioner, Oli Rehn.
In the US, the data was generally pretty soft, giving some respite to the Euro. US GDP was downgraded from 2.2% to 1.9% for Q1, Initial jobless claims rose back to 383k against the expectation of 370k while the ADP report showed a reading of +133k (Exp +150k), and we now await today’s NFP data, with an expectation of +150k.
Equities had a less volatile day (DAX -0.25%, CAC +0.05%, S+P -0.23%)
Technically, nothing has really changed. Things continue to look pretty dire for the Euro, although I see the retail market is now net short, so the downside might slow a little. We are currently within 10 points of yesterdays levels following the bounce on the back of the US data and we remain above the short term target of 1.2325. A break would lead towards 1.2295 and then on to 1.2240 and 1.2210. As I have previously said, 1.1875 the 8 June 2010 low is looming into sight, and I am now becoming more and more of the view that we are heading towards 1.0300.
On the topside, the bounce today stopped perfectly at the 1.2425 resistance. This remains the immediate target, and a break would lead on towards 1.2500. I think now if we get back above 1.2525, then the squeeze will gain momentum but right now we should stay with the short side, allowing ourselves the room to sell into strength towards 1.2500, leaving stops at around 1.2570.
The dailies show no side of turning around and I suspect any bounces should be short lived, although today, being a Friday and with NFP later on today anything could happen, so be flexible. Before the NFP the other main event today will be the China/Germany/EU manufacturing PMI readings which will add to the volatility.
Good luck, good w/e!
