EURUSD Movement
For the 24 hours to 23:00 GMT on Friday, EUR rose 1.78% against the USD and closed at 1.2659, after European leaders agreed on measures to ease fiscal strains in Italy and Spain and spurred optimism that they are closer to resolving the region’s sovereign-debt crisis.
The Euro advanced after European leaders agreed to create a single supervisory body for Euro-zone banks and allow them to be recapitalised directly by the rescue fund without adding to government debt.
The European Council Chairman, Herman Van Rompuy, stated that the aim was to create a supervisory mechanism involving the European Central Bank (ECB) by the end of 2012, and to break the “vicious circle” between banks and sovereign governments. He further added that countries that were complying with European Union budget policies would be able to access the bloc’s temporary EFSF and permanent ESM rescue fund.
Separately, ECB President, Mario Draghi, stated that “the agreement showed the long-term commitment to the Euro by all member states of the Euro area.”
Following the EU leaders agreement, Spain’s 10-year bond yield dropped 39 basis points to 6.56%, while Italy’s 10 year yield fell 42 basis points to 5.78%.
In the Euro-zone, M3 money supply climbed 2.9% (YoY) in May, compared to a 2.5% rise in April. Meanwhile, annual inflation remained stable at 2.4% in June, in line with market consensus. Separately, retail sales in Germany fell 0.3% (MoM) in May, compared to a 0.2% drop in the previous month. Meanwhile in France, gross domestic product remained flat in the first quarter of 2012, while consumer spending rose 0.4% (MoM) in May.
Today morning in the Asian session, at GMT0300, the pair is trading at 1.2622, with the EUR trading 0.29% lower from Friday’s close, as optimism from last week’s European Union summit faded, as investors speculated that though new policies announced new measures to battle the debt crisis, they won’t completely solve the crisis.
The pair is expected to find support at 1.2481, and a fall through could take it to the next support level of 1.234. The pair is expected to find its first resistance at 1.2728, and a rise through could take it to the next resistance level of 1.2834.
Trading trends in the pair today are expected to be determined by the release of manufacturing purchasing manager index and unemployment data in the Euro-zone.
The currency pair is trading between its 20 Hr and 50 Hr moving averages.
