Mid-Day Report: Euro Broadly Lower While Stocks Rebounded

While global stock markets recovered, Euro extended recent fall against dollar as EU leaders are preparing further sanctions against Russia. Twenty-eight EU ministers are meeting in Brussels today. German foreign minister Steinmeir said on arrival that it’s necessary to have sharper measures and higher pressure, together with diplomatic means, to solve the Russian-Ukraine tensions. Dutch foreign minister Timmermans said Holland wanted EU to make a “united”, “strong”, “clear statement against the unrest in the eastern Ukraine”. UK foreign secretary Hammond said EU have to address Russia’s support to separatist in Ukraine and “low of heavy weapons from Russia. Nonetheless, it’s believed that EU would refrain from so-called level three sanctions, that is sectoral sanctions. And, EU would just stay with expanding the list of Russian officials and businessmen under asset freezes and travel bans.

Technically, EUR/USD’s breach of 1.3476 support today carries larger bearish implication. Together with the break of medium term trend line, the up trend from 2012 low of 1.2042 could have finished at 1.3993, just ahead of 1.4 psychological level. And we’d probably see EUR/USD head back to 1.3 level ahead. EUR/JPY is staying in recent down trend and is heading back to 135.50/136.22 key support zone. EUR/AUD also extended recent fall and broke 1.4358 support today. Though, EUR/GBP and EUR/CAD are stuck in recent range so far.

One the data front, US headline CPI was unchanged at 2.1% yoy in June, inline with expectation. But core CPI unexpectedly dropped back to 1.9% yoy. House price index rose 0.4% mom in May. UK CBI trends total orders dropped sharply to 2 in July. Public sector net borrowing dropped to GBP 9.5b in June. Swiss trade surplus narrowed to CHF 1.38b in June. Japan all industry index rose 0.6% mom in May. China conference board leading index rose 1.3% in June.

Daily Pivots: (S1) 1.3507; (P) 1.3528 (R1) 1.3543; More….

EUR/USD’s fall continues today and reaches as low as 1.3458 so far, breached 1.3476 leg support. Intraday bias remains on the downside for the moment. Sustained trading below 1.3476 will carry larger bearish implication and will target 61.8% projection of 1.3993 to 1.3502 from 1.3700 at 1.3397. Nonetheless, it should be noted again that strong rebound from the current level will dampen the bearish case of trend reversal. And above 1.3548 minor resistance will turn intraday bias neutral first.

In the bigger picture, overall price actions from 1.6039 is viewed as a corrective pattern. The choppy rise from 1.2042 is seen as a leg inside the pattern. Bearish divergence condition in daily and weekly MACD raises the chance that this leg is finished at 1.3993 already. Sustained break of 1.3476 support will confirm this bearish case and should target 1.2755 and below. Meanwhile, break of 1.3993 is needed to confirm rally resumption. Otherwise, we won’t turn bullish even in case of strong rebound.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
02:00
CNY
Conference Board June Leading Index June
1.30%

0.70%

04:30
JPY
All Industry Activity Index M/M May
0.60%
0.70%
-4.30%
-4.60%
06:00
CHF
Trade Balance (CHF) Jun
1.38B
2.97B
2.77B
2.85B
08:30
GBP
Public Sector Net Borrowing (GBP) Jun
9.5B
10.3B
11.5B
11.9B
10:00
GBP
CBI Trends Total Orders Jul
2
9
11

12:30
USD
CPI M/M Jun
0.30%
0.30%
0.40%

12:30
USD
CPI Y/Y Jun
2.10%
2.10%
2.10%

12:30
USD
CPI Core M/M Jun
0.10%
0.20%
0.30%

12:30
USD
CPI Core Y/Y Jun
1.90%
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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