EURUSD Movement
For the 24 hours to 23:00 GMT, EUR declined 0.50% against the USD and closed at1.2176, after the European Central Bank (ECB) disappointed investors who were hoping for imminent move to fight the Euro-zone debt crisis.
The European Central Bank left interest rates unchanged at a record low 0.75%, in line with market estimates. The rate on the marginal lending facility was held at 1.50%, while the deposit facility rate was kept at 0.00%.
Following the ECB’s decision to hold steady on interest rates, the ECB President, Mario Draghi assured that policy makers “will consider undertaking further non-standard measures” if conditions deteriorate. He further added that the central bank would gear up to buy Italian and Spanish bonds on the open market but would only act after Euro-zone governments have activated bailout funds to do the same.
Yesterday, Spanish Prime Minister, Mariano Rajoy and his Italian counterpart, Mario Monti, in a joint news conference stated that the two countries want to work together to solve the long-running debt crisis, citing that they welcomed ECB President, Mario Draghi’s commitment that “the euro currency was irreversible.”
Moreover, the International Monetary Fund (IMF) called for a “policy game changer” in the Euro-zone to arrest the spread of the debt crisis, stating that not enough is done to stop spread of Euro-zone debt crisis.
In a bond auction, Spain sold €3.13 billion ($3.84 billion), exceeding a target of €3 billion even at a higher borrowing costs. The Treasury sold €1.05 billion 10-year bond at a yield of 6.647%, up from the 6.43% paid at the prior auction on July 5. Separately, the yield on securities maturing in October 2016 and July 2014 were sold at an average yield of 5.971% and 4.774%, respectively.
On the economic front, producer price inflation in the Euro-zone on the yearly basis eased to 1.8% in June, from 2.3% in May.
In the Asian session, at GMT0300, the pair is trading at 1.2174, with the EUR trading marginally lower from yesterday’s close.
The pair is expected to find support at 1.2070, and a fall through could take it to the next support level of 1.1967. The pair is expected to find its first resistance at 1.2341, and a rise through could take it to the next resistance level of 1.2509.
Trading trends in the pair today are expected to be determined by the release of Euro-Zone services PMI and retail sales data.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
