EUR/USD July 3 – Losses Continue After Weak Eurozone

The euro started the new trading week in promising fashion, but has changed its tune and has posted sharp losses against the US dollar. EUR/USD crashed below the 1.30 line on Tuesday after the Portuguese finance and foreign ministers resigned. The pair continues to lose ground on Wednesday, as the Italian and Eurozone Service PMIs fell short of their estimates. However, there was some relief from Eurozone Retail Sales, which climbed to a four-month high. In the US, it promises to be a busy day with four key releases on the schedule – ADP Non-Farm Payrolls, Trade Balance, Unemployment Claims and the ISM Non-Manufacturing PMI.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar was fairly steady, touching a low of 1.2961 and consolidating at 1.2974. Early in the European session, the pair dropped sharply, falling to a low of 1.2924. EUR/USD has recovered slightly, and was trading at 1.2947.

Current range: 1.2940 – 1.3000.

Further levels in both directions:  

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• Below: 1.2940, 1.2890, 1.2840, 1.28, 1.2750 and 1.27.
• Above: 1.3000, 1.3050, 1.3100, 1.3160, 1.32, 1.3255, 1.3350, 1.34, 1.3434 and 1.3480.
• 1.2940 is facing pressure on the downside. 1.2890 is next.
• 1.3000 is providing weak resistance. This is followed by 1.3050.

Euro struggling in mid-129 range after weak Euro PMIs – click on the graph to enlarge.

EUR/USD Fundamentals

• 7:15 Spanish Services PMI. Exp. 47.8 points. Actual 47.8 points.
• 7:45 Italian Services PMI. Exp. 47.1 points. Actual 45.8 points.
• 8:00 Eurozone Final Services PMI. Exp. 48.6 points. Actual 48.3 points.
• 9:00 Eurozone Retail Sales. Exp. 0.4%. Actual 1.0%.
• 11:30 US Challenger Job Cuts.
• 12:15 US ADP Non-Farm Employment Change. Exp. 161K.
• 12:30 US Trade Balance. Exp. -40.3B.
• 12:30 US Unemployment Claims. Exp. 345K.
• 14:00 US ISM Non-Manufacturing PMI. Exp. 54.3 points. See how to trade this event with USD/JPY.
• 14:00 US Treasury Secretary Jack Lew Speaks.
• 14:30 US Crude Oil Inventories. Exp. -2.6M.
• 16:00 US Natural Gas Storage. Exp. 75B.

For more events and lines, see the EUR/USD.

EUR/USD Sentiment

• Portuguese political crisis hurts euro: The euro broke below the key 1.30 level as a political crisis grips Portugal. The country has been struggling with austerity measures as part of its bailout program, and the government has been rocked by the resignations of the finance and foreign ministers on Tuesday. With the country mired in the third year of a recession and unemployment at 18%, talk of a Euro-exit is bound to increase, which is bad news for the shaky euro.
• Spanish Employment Numbers Sparkle: It’s been a solid week for Spanish releases. The week started with Spanish Manufacturing PMI rising to the 50-point level for the first time since in two years. Spanish Unemployment Change was outstanding, dropping by 127.2 thousand. This easily beat the estimate of -83.5 thousand. The markets had expected a strong seasonal release, but this drop clearly beat all expectations. On Wednesday, Spanish Services PMI came in at 47.8 points, matching the forecast. This was in contrast to the Italian and Eurozone Services PMIs, which both fell short of their estimates.
• Global growth downgraded: Global economic growth has not been particularly strong, and has now been downgraded by the HSBC. Global growth was revised from 2.8% to 2.0% in 2013, and from 3.1% to 2.6% in 2014. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging  countries such as India and Brazil. The report revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4%. to 7.4% for next year. Weaker global growth will make it even more difficult for the Eurozone economy to get back on its feet and emerge from a rough recession.
• Greek bailout in trouble?: The Greek bailout is back in the news, as officials in the Eurozone are voicing dissatisfaction with the lack of progress by Athens in implementing the bailout conditions. The next installment of bailout funds amounts to some EUR 8.1 billion, and is scheduled for delivery in early July. However, the Eurozone feels that Greece is lagging behind in restructuring its public sector, such as tax collection and health care services. Greece has been given three days to assure its creditors that it is keeping its end of the bargain, or the bailout funds could be withheld. Eurozone financial ministers meet on July 8, and the Greek bailout will be high on the agenda.

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