Daily Report: Euro Soft in Tight Range ahead of GDP Releases

Euro stays in tight range against dollar as markets are looking forward to Q2 GDP data from Eurozone today. German GDP is expected to contract -0.1% qoq versus Q1’s impressive 0.8% qoq. French GDP is expected to grow 0.1% qoq versus Q1’s % qoq. Overall Eurozone GDP is expected to grow 0.1% qoq versus Q1’s 0.2% qoq. Eurozone will also release July CPI final and ECB monthly bulletin. According to a Reuters poll, economists expected a 15% chance that ECB will adopt quantitative easing this year, and over 30% chance in 2015. Economists noted that the eurozone is facing the problem of losing momentum in recovery together with deflationary risks. And indeed, the Eurozone could be one major shock away from deflation. Geopolitical risks in Ukraine also posted downside risks to Eurozone’s growth.

Also, in Eurozone, Bundesbank chief Weidmann said yesterday that “the temptation to boost the competitiveness of our economies by weakening the euro should not be the purpose of the single currency.” And he emphasized that “a strong Europe and a strong euro go hand in hand.” Meanwhile, he urged France to set an example on budgetary discipline as “growth must come from inside”. This was seen as response to French’s call for ECB and German measures to boost Eurozone growth.

Technically, Euro is mixed in generally. The rebound in EUR/GBP extended this week, primarily based on Sterling’s weakness. However, recovery in EUR/AUD and EUR/CAD lost steam. EUR/USD is also stuck in tight range above 1.3332 temporary low. We’d probably see Euro having little reactions to today’s important data but follow the trend of others.

Elsewhere, New Zealand business manufacturing index dropped to 53 in July, retail sales rose 1.2% qoq in Q2. Japan machine orders rose 8.8% mom in June. UK RICS house price balance dropped to 49 in July. Swiss will release PPI, Canada will release new housing price index and US will release import price and jobless claims today.

Daily Pivots: (S1) 0.7945; (P) 0.7982; (R1) 0.8043; More

Despite a deep retreat, EUR/GBP was held above 0.7915 minor support and the rebound from 0.7873 then recovered. The cross hit as high as 0.8019 so far. Intraday bias remains on the upside and the rebound from 0.7873 short term bottom should target 0.8033 resistance first. The larger trend is possibly reversing and break of 0.8033 will target 0.8157 key support turned resistance for confirming this bullish case. On the downside, below 0.7920 will dampen this bullish case and turn bias back to the downside for 0.7873 support.

In the bigger picture, choppy decline from 0.8806 is viewed as part of the long term consolidation pattern from 0.9799 (2008 high). With 0.8157 support turned resistance intact, deeper fall could still be seen to 0.7755 (2012 low) and below. In that case, we’ll look for reversal signal again as the cross approaches 0.7693 long term support level. Meanwhile, decisive break of 0.8157 will indicate that fall from 0.8806 is completed and will bring stronger rise back towards 0.8806 resistance.

EUR/GBP 4 Hours Chart

EUR/GBP Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
22:30
NZD
Business NZ Manufacturing Index Jul
53

53.3
53.4
22:45
NZD
Retail Sales Ex Inflation Q/Q Q2
1.20%
1.00%
0.70%
0.80%
23:01
GBP
RICS House Price Balance Jul
49%
51%
53%
52%
23:50
JPY
Machine Orders M/M Jun
8.80%
15.50%
-19.50%

5:30
EUR
French GDP Q/Q Q2 P

0.10%
0.00%

6:00
EUR
German GDP Q/Q Q2 P

-0.10%
0.80%

7:15
CHF
Producer Import Prices M/M Jul

0.00%
0.00%

7:15
CHF
Producer Import Prices Y/Y Jul

-0.90%
-0.80%

8:00
EUR
ECB Monthly Bulletin

9:00
EUR
Eurozone CPI M/M Jul F

-0.60%
0.10%

9:00
EUR
Eurozone CPI Y/Y Jul F

0.40%
0.50%

9:00
EUR
Eurozone CPI – Core Y/Y Jul F

0.80%
0.80%

9:00
EUR
Eurozone GDP Q/Q Q2 A

0.10%
0.20%

12:30
CAD
New Housing Price Index M/M Jun

0.20%
0.10%

12:30
USD
Import Price Index M/M Jul

-0.40%
0.10%

12:30
USD
Initial Jobless Claims (AUG 9)

307K
289K

14:30
USD
Natural Gas Storage

82B

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