9 Jul 2013
Euro corrective upside alive for now
FXstreet.com (Barcelona) - The shared currency have utterly digested the last ECB meeting and US Payrolls, leaving behind fresh lows in the boundaries of 1.2800 to initiate a correction higher and test 1.2900 the figure during the European morning.
FOMC minutes looms, ECB forward guidance
The last solid results from June’s NFP left market participants with the flavor that the September meeting could be the one indicated for the Federal Reserve to start scaling back its bond buying programme. The subsequent and expected USD rally climbed to multi-year highs beyond 84.40, dragging the EUR and the GBP to lower levels seen months ago, and the JPY back to lows above 101 vs. the buck. However, with US yields retracing from recent highs and Chairman Bernanke keeping a dovish tone tomorrow, the EUR/USD could see a retest of the psychological mark at 1.3000 in the upcoming sessions.
The week started with an upside correction prompted by calmer waters in Portugal and after the Eurogroup granted Greece with the following tranche of its financial aid package in exchange of fulfilling austerity and fiscal measures. Despite the well-known lack of long-term sustainability of those scenarios, EUR officials seemed once again more interested in getting rid of the dark clouds as soon as possible, rather than bringing long-lasting, if any, solutions. Although we all know that this has been and will be the attitude from the EU officials in the foreseeable future, there is not much we can expect from them, especially with the German elections on the horizon and conditioning any decision.
The change of course by the ECB, with Draghi now leaving behind his ‘we do not pre-commit’ politics towards the adoption of forward guidance, will open a new front of weakness for the euro, as interest rates would be at current or lower levels for ‘an extended period of time’. And in this particular phrase, Draghi did pre-commit, leaving investors wondering the timing of a possible change in expectations. However, as (if) fundamentals in the euro area improve sufficiently, the new forward guidance parameters would be put to the test.
When comes to technicals, the pair is now testing the area around 1.2860/80, where converge the support line set from November lows and the 50% Fibonacci retracement of the July’12-February’13 upside. Interim support lies at ytd lows at 1.2740 ahead of the area of 1.2660/80, where sit the 61.8% Fibo and November’12 lows. On the flip side, the initial up-barrier lies at 1.2950, 23.6% Fibonacci retracement of June highs-July lows followed by the psychological limestone at 1.3000.
FOMC minutes looms, ECB forward guidance
The last solid results from June’s NFP left market participants with the flavor that the September meeting could be the one indicated for the Federal Reserve to start scaling back its bond buying programme. The subsequent and expected USD rally climbed to multi-year highs beyond 84.40, dragging the EUR and the GBP to lower levels seen months ago, and the JPY back to lows above 101 vs. the buck. However, with US yields retracing from recent highs and Chairman Bernanke keeping a dovish tone tomorrow, the EUR/USD could see a retest of the psychological mark at 1.3000 in the upcoming sessions.
The week started with an upside correction prompted by calmer waters in Portugal and after the Eurogroup granted Greece with the following tranche of its financial aid package in exchange of fulfilling austerity and fiscal measures. Despite the well-known lack of long-term sustainability of those scenarios, EUR officials seemed once again more interested in getting rid of the dark clouds as soon as possible, rather than bringing long-lasting, if any, solutions. Although we all know that this has been and will be the attitude from the EU officials in the foreseeable future, there is not much we can expect from them, especially with the German elections on the horizon and conditioning any decision.
The change of course by the ECB, with Draghi now leaving behind his ‘we do not pre-commit’ politics towards the adoption of forward guidance, will open a new front of weakness for the euro, as interest rates would be at current or lower levels for ‘an extended period of time’. And in this particular phrase, Draghi did pre-commit, leaving investors wondering the timing of a possible change in expectations. However, as (if) fundamentals in the euro area improve sufficiently, the new forward guidance parameters would be put to the test.
When comes to technicals, the pair is now testing the area around 1.2860/80, where converge the support line set from November lows and the 50% Fibonacci retracement of the July’12-February’13 upside. Interim support lies at ytd lows at 1.2740 ahead of the area of 1.2660/80, where sit the 61.8% Fibo and November’12 lows. On the flip side, the initial up-barrier lies at 1.2950, 23.6% Fibonacci retracement of June highs-July lows followed by the psychological limestone at 1.3000.