EURUSD Movement
For the 24 hours to 23:00 GMT, EUR declined 0.40% against the USD and closed at 1.2069, as risk aversion increased among investors following little hope that Greece would meet the terms of its bailout, raising doubts on its future in the Euro-zone.
Yesterday, European officials stated that Greece is unlikely to be able to pay what it owes and further debt restructuring is likely to be necessary.
The Greece Prime Minister, Antonis Samaras, stated that nation’s economy could contract by more than 7% this year, pushing debt-cutting targets further out of reach.
Meanwhile, Moody’s Investors Service has lowered the outlook on the European Financial Stability Facility (EFSF) to ‘Negative’ from ‘Stable’. However, it maintained the EFSF’s triple-A rating.
Denting investors’ sentiment further, Spain’s second biggest region, Catalonia stated that it may seek government rescue aid, sparking fears that Spain would need a full international bailout.
In a bond auction, Spanish Treasury sold €1.63 billion worth of three-month government bonds at an average yield of 2.434%, up slightly from 2.362%, while it also sold €1.42 billion of six-month debt at an average yield of 3.691%, up from 3.237% at a similar auction last month.
Italy’s benchmark 10-year bond yield jumped to as high as 6.598%, while the Spanish 10-year bond yields surged to a euro-era record of 7.64%.
In economic news, in the Euro-zone, preliminary manufacturing Purchasing Managers Index (PMI) declined to a seasonally adjusted 44.1 in July, while preliminary services PMI rose to a seasonally adjusted 47.6 in July. Additionally, in Germany, flash manufacturing PMI dropped to 43.3 in July, from 45.0 recorded in June. Moreover, the Conference Board reported that the leading economic index in Germany dropped 0.1% (MoM) to 104.3 in May, while the coincident economic index gained 0.1% (MoM) to 107.2 in May.
In the Asian session, at GMT0300, the pair is trading at 1.2070, with the EUR trading marginally higher from yesterday’s close.
The pair is expected to find support at 1.2029, and a fall through could take it to the next support level of 1.1989. The pair is expected to find its first resistance at 1.2124, and a rise through could take it to the next resistance level of 1.2179.
Trading trends in the pair today are expected to be determined by the release of IFO – business climate, current assessment and expectations data in Germany.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
