Euro : 1.2580
The Euro started the week on a relatively calm, but slightly soft note, with Asia unsure what to do, before Europe took it lower, after both Holland and Finland threatened to block the use of the ESM to buy government bonds in the secondary market, which in turn, threatens last week’s EU deal. It begs the question as to what they were actually doing at the summit. Why did they not question it then?!
The European data was not up to much, but was overall no worse than expected, with EU Unemployment at 11.1% and the EU PMIs soft but they could have been a lot worse. Germany came in at 45.00, lower than the previous month (and the worst in 3 years) but above the 44.7 expectation. The overall EU reading was unchanged at 45.1, against expectations of 44.8.
Spanish and Italian bond yields were also a little easier at 6.22% and 5.7% respectively.
Later, in the US, the ISM showed a sharp drop to below 50 to 49.7, from the previous reading of 53.5. Noone expected a drop below 50 and we now await Fridays NFP, where a poor reading may well push the Fed to act at the next FOMC which would most likely lead to a weaker US$ and higher equity/risk markets.
So, overall the Euro has given up some of Fridays gains without doing too much damage and it would appear that for the next 24 hours we may drift around in a 1.2525/1.2660 range. With the US taking time out on Wednesday for Independence Day, interest is going to dwindle and liquidity will begin to thin out somewhat.
The 4 hour charts have turned a little lower and it may be that we do head back to the lower end of the current range where 1.2520, as I have said in previous weeks acts as a magnet that we keep returning to, but at this stage I would not be looking for too much more on the downside, unless the whole EU deal begins to fall apart.
The hourly charts have now unwound their overbought situation, while the dailies remain fairly flat, so without looking for too much of a directional move one way or the other, further consolidation above 1.2520 looks to me to be the way to go for the coming session. It may be that we hug close to 1.2580 for the next few hours.
Today’s main economic highlight will be the EU PPI.
