EURUSD Movement
For the 24 hours to 23:00 GMT, EUR rose 0.25% against the USD and closed at 1.2628, following the European Central Bank’s (ECB) decision to buy bonds issued by heavily indebted Euro-zone countries in order to ease rising borrowing costs.
Revealing bond buying program, the ECB President, Mario Draghi, cleared that the ECB would buy an unlimited amount of sovereign bonds of countries that seek international financial aid and agree to strict budget rules. However, gains were capped, as the ECB slashed its Euro-zone growth forecast for 2012, to a fall of between 0.6% and 0.2% and expected a very gradual economic recovery.
Meanwhile, the ECB kept its interest rates unchanged at a record low of 0.75%, in line with market expectations.
In Germany, the Finance Minister, Wolfgang Schaeuble expressed confidence that the country’s top court would not block European Stability Mechanism and stressed that the Euro would remain a “stable currency”.
Moreover, the French Finance Minister, Pierre Moscovici, stated that the nation wants the European Union (EU) to find a “strong and structural solution” for debt-hit Greece and Spain at next month’s EU summit.
In economic news, on a quarterly basis, the Euro-zone GDP decreased 0.2% in the second quarter of 2012, in line with the preliminary estimates, and following a 0.3% drop in the previous quarter. Separately, the French unemployment rate rose to 10.2% in the second quarter of 2012, from 10.0% in the first quarter. German factory orders, on seasonal and inflation adjusted basis, gained 0.5% (MoM) in July, compared to a fall of 1.6% in June.
In a bond auction, France raised €3 billion ($3.8 billion) via a ten-year bond auction at an interest rate of 2.21%, compared with 2.53% during the similar auction on July 5. Additionally, the nation issued five-year bonds worth €1.53 billion at 1.05%, and fifteen-year bonds worth €3.45 billion at 2.85%. Meanwhile, Spain borrowed €3.5 billion in two-, three-, and four-year bonds at lower rates and meeting the upper end of the €2.5 billion – €3.5 billion target range.
In the Asian session, at GMT0300, the pair is trading at 1.2630, with the EUR trading marginally higher from yesterday’s close.
The pair is expected to find support at 1.2577, and a fall through could take it to the next support level of 1.2525. The pair is expected to find its first resistance at 1.2667, and a rise through could take it to the next resistance level of 1.2705.
Trading trends in the pair today are expected to be determined by the release of trade balance, industrial production and wholesale price index in Germany.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
