Mid-Day Report: Euro Stays Bearish after ECB

Euro stays steadily bearish after ECB left rates unchanged at record low of 0.15% as widely expected. ECB president Draghi pledged in the post meeting press conference that the central bank will “closely monitor” the impact of geopolitical risks on the modest recovery in Eurozone. He noted that the fallout from the Ukraine crisis was “hard to assess”. Regarding the economy, Draghi said that recovery was “weak, fragile and uneven” and recent data showed “slowing down in the growth momentum”. The risks to recovery are “to the downside”. Separately, BoE maintained the Bank rate at 0.50% and the asset purchase target at GBP 375b as widely expected. Only a brief statement was released and focus will turn to meeting minutes to be published on August 20.

Released from US, initial jobless claims dropped -14k to 289k in the week ended August 2, better than expectation of 305k. That;s the lowest number in eight years. The four week moving average of initial claims dropped to 293.5k, hitting the lowest since February 2006. Continuing claims dropped -24k to 2.52m in the week ended July 26. From Canada, building permits rose sharply by 13.5% mom in June versus expectation of -1.8% mom fall. From Swiss, SECO consumer confidence dropped to -1 in July versus expectation of rise to 4. Foreign currency reserves rose to CHF 453.4b in July. German industrial production rose 0.3% mom in June, below expectation of 1.4% mom.

Australian dollar dropped sharply today after job data. Unemployment rate jumped sharply from 6.0% to 6.4% in July, hitting a 12 year high. Also, that’s the first time Australian unemployment rate surpassed that of US since 2007. Total employment also unexpectedly dropped -0.3% versus expectation of 13.5k. Full time job rose 14.5k while part-time jobs contracted 14.8k. Participation rate, jumped slightly from 64.7% to 64.8%. RBA maintained its neutral stance earlier this week, signaling interest rates would be kept at the record low of 2.50% for a while.

Daily Pivots: (S1) 1.3347; (P) 1.3366 (R1) 1.3401; More….

With 1.3444 minor resistance intact, deeper fall is still expected in EUR/USD for 100% projection of 1.3993 to 1.3502 from 1.3700 at 1.3209 next. On the upside, break of 1.3444 resistance is needed to signal short term bottoming. Otherwise, outlook will stay bearish in case of recovery.

In the bigger picture, overall price actions from 1.6039 is viewed as a corrective pattern. One interpretation is that fall from 1.6039 to 1.2329 was the first leg. Price actions from 1.2329 were the second leg, in form of a triangle. In such view, the fifth leg of the triangle pattern could have completed at 1.3993 already. In other words, the decline from 1.3993 is resuming the fall from 1.16039. Medium term outlook will now stay cautiously bearish as long as 1.3700 resistance holds. Break of 1.2755 key support level will raise the chance of an eventual break of 1.1875 low.

EUR/USD 4 Hours Chart

EUR/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
01:30
AUD
Employment Change Jul
-0.3K
13.5K
15.9K
14.9K
01:30
AUD
Unemployment Rate Jul
6.40%
6.00%
6.00%

05:45
CHF
SECO Consumer Confidence Jul
-1
4
1

06:00
EUR
German Industrial Production M/M Jun
0.30%
1.40%
-1.80%
-1.70%
07:00
CHF
Foreign Currency Reserves Jul
453.4B

449.6B

11:00
GBP
BoE Rate Decision
0.50%
0.50%
0.50%

11:00
GBP
BoE Asset Purchase Target
375B
375B
375B

11:45
EUR
ECB Rate Decision
0.15%
0.15%
0.15%

12:30
CAD
Building Permits M/M Jun
13.50%
-1.80%
13.80%
15.40%
12:30
USD
Initial Jobless Claims
289K
305K
302K
303K
14:00
CAD
Ivey PMI Jul

54.1
46.9

14:30
USD
Natural Gas Storage

88B

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