Daily Report: Euro Opens the Week Lower, Dollar Firm

Euro opens the week lower against the broadly higher dollar. Some comments from ECB officials over the weekend is weighing down the common currency. ECB executive board member Coeure said that the central bank will keep rates low for a long period of time to ensure monetary stability. Meanwhile, he also urged governments to “invest in Europe” and that’s “the only way out”. And, he said “one should expect a divergence of monetary conditions between the euro zone and the United States and Britain – where interest rates will at some point be lifted.” Governing council member Noyer said that “even if the risk of deflation seems to have been avoided, we have … price increases that are too low.” And, Noyer was surprised on “the weak impact of the monetary easing” on prices.

IMF chief Lagarde hinted that there would be a cut in the global growth forecast. She noted that “the global economy is gathering speed, though the pace may be a bit less than we previously predicted because the growth potential is lower and investment remains lackluster”. She urged to “reinforce supply capacity” to strengthen the recovery as effect of central bank’s effort to sustain demand is limited. Nonetheless, she expected US to have “a significant rebound.

On the data front, Japan leading indicator dropped to 105.7 in May versus expectation of 105.9. Swiss unemployment rate was unchanged at 3.2% in June. German industrial production dropped -1.8% mom in May versus expectation of flat mom. Swiss foreign currency reserves and Eurozone Sentix investor confidence will be released in European session. Canada will release building permits and Ivey PMI in US session.

Looking ahead, a key event is the release of the FOMC minutes on Wednesday, together with several Fed presidents speaking. While Richmond Fed’s Jeffrey Lacker and Minneapolis Fed’s Narayana Kocherlakota will be speaking on Tuesday, Kansas City Fed’s Esther George will talk on Thursday, followed by Atlanta Fed’s Dennis Lockhart and Chicago Fed’s Charles Evans on Friday. The BoE meeting will be due Thursday but there will likely be no change in policy. Further details about BoE’s decision would not be out until release of the MPC minutes on July 23.

Here are some highlights of the week:

  • Tuesday: Australia NAB business confidence; German trade balance; Swiss CPI, retail sales; UK manufacturing and industrial production;
  • Wednesday: China CPI and PPI; Canada housing starts; FOMC minutes
  • Thursday: Australia employment; China trade balance; BoE rate decision; US jobless claims
  • Friday: Australian home loans; Canada employment

Daily Pivots: (S1) 0.7915; (P) 0.7925; (R1) 0.7931; More

EUR/GBP’s fall continues today and intraday bias remains on the downside. The current decline should now target 168.1% projection of 0.8584 to 0.8157 from 0.8399 at 0.7708 next, which is close to key long term support level of 0.7693. On the upside, above 0.7972 resistance will turn bias neutral and bring consolidation. But near term outlook will stay bearish as long as 0.8033 resistance holds.

In the bigger picture, choppy decline from 0.8806 is viewed as part of the long term consolidation pattern from 0.9799 (2008 high). Such medium term fall should now target 0.7755 (2012 low) and below. We’ll look for reversal signal again as the cross approaches 0.7693 long term support level. On the upside, break of 0.8399 is needed to confirm medium term reversal. Otherwise, outlook will stay bearish.

EUR/GBP 4 Hours Chart

EUR/GBP Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
5:00
JPY
Leading Index May P
105.7
105.9
106.5

5:45
CHF
Unemployment Rate Jun
3.20%
3.20%
3.20%

6:00
EUR
German Industrial Production M/M May
-1.80%
0.00%
0.20%

7:00
CHF
Foreign Currency Reserves Jun

445.0B
444.4B

8:30
EUR
Eurozone Sentix Investor Confidence Jul

7.8
8.5

12:30
CAD
Building Permits M/M May

3.00%
1.10%

14:00
CAD
Ivey Purchasing Managers Index s.a. Jun

52.5
48.2

14:30
CAD
BoC Business Outlook Survey

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