Daily Report: Euro Range Bound as EU Ministers Meet on Russia Sanctions

Euro stays in tight range as markets are awaiting the meeting between EU foreign ministers in Brussels today. There were expectations that EU will approve new sanctions on Russia regarding the suspected role in downing of a Malaysia Airlines flight last week. UK prime minister Cameron called for “hard-hitting” measures yesterday and said to influence Russia, there must be a sense that “the rest of the world is actually going to team up and put in place sanctions that will damage Russia’s economy”. However, such view might not be shared by all other EU ministers. French foreign minister played down the expectations and noted that EU would are just “expected to respond to the guidelines set out” last Wednesday, a day before the incident. There were talks that EU could just speed up the imposition of the agreed sanctions rather than expanding them. And Holland’s stance would be crucial today as it suffered the greatest in the incident.

Euro’s reaction will be closely watched today even though we’re not expecting much. The common currency stayed generally soft against other major currencies but most are staying in range. EUR/CAD formed a short term bottom at 1.4439 but subsequent recovery was rather weak. The cross turned into sideway consolidation rather then reversed the trend from 1.5585. Deeper fall is expected in near term and would likely target 161.8% projection of 1.5585 to 1.5003 from 1.5305 at 1.4363 and below. But considering bullish convergence condition in daily MACD, strong support should be seen at 38.2% retracement of 1.2126 to 1.5585 at 1.4264 to contain downside and bring reversal.

Elsewhere, China conference board leading index rose 1.3% in June. Swiss trade balance, UK public sector net borrowing and CBI trends total orders will be release in European session. But the main focus will be on US CPI which is expected to be unchanged at 2.1% yoy in June. Core CPI is expected to be unchanged at 2.0% yoy. US will also release house price index and existing home sales.

Daily Pivots: (S1) 0.8970; (P) 0.8979; (R1) 0.8989; More….

USD/CHF stays in consolidation below 0.9003 temporary top and intraday bias remains neutral. Outlook is unchanged. With 0.8958 support intact, we’re favoring the bullish case that pull back from 0.9036 has completed at 0.8855 already. Further rally is expected to 0.9036. Break there will resume whole rise from 0.8702 and target 0.9156 key resistance next. Though, below 0.8985 will mix up the near term outlook and turn focus back to 0.8897 support instead.

In the bigger picture, price actions from 0.9971 are still viewed as a correction pattern. Decline from 0.9838 is seen as the third leg. As long as 0.9156 resistance holds, deeper fall would still be seen to 50% retracement of 0.7065 to 0.9971 at 0.8518 and below. We’d start to look for reversal signal below 0.8518 again. Meanwhile, note that medium term downside momentum has been diminishing as seen in weekly MACD. Break of 0.9156 will argue that such correction pattern is completed and will turn outlook bullish for a test on 0.9971.

USD/CHF 4 Hours Chart

USD/CHF Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
2:00
CNY
Conference Board June Leading Index June
1.30%

0.70%

4:30
JPY
All Industry Activity Index M/M May

0.70%
-4.30%

6:00
CHF
Trade Balance (CHF) Jun

2.97B
2.77B

8:30
GBP
Public Sector Net Borrowing (GBP) Jun

10.3B
11.5B

10:00
GBP
CBI Trends Total Orders Jul

9
11

12:30
USD
CPI M/M Jun

0.30%
0.40%

12:30
USD
CPI Y/Y Jun

2.10%
2.10%

12:30
USD
CPI Core M/M Jun

0.20%
0.30%

12:30
USD
CPI Core Y/Y Jun

2.00%
2.00%

13:00
USD
House Price Index M/M May

0.10%
0.00%

14:00
USD
Existing Home Sales Jun

4.97M
4.89M

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