EUR/USD remains steady in Thursday trading as the pair trades at the 1.30 line in the European session. US markets are closed today for the July 4th holiday. In the Eurozone, today’s highlight is the ECB rate announcement. The markets are expecting the rate to remain pegged at 0.50%, but the accompanying press conference has proven to be a significant market-mover in the recent past, so traders should be prepared for possible movement from EUR/USD. There are only two releases on today’s schedule. Eurozone Final GDP looked weak, recording its fourth consecutive decline. French 10-year bonds were up slightly, with an average yield of 2.32%.
Portugal finds itself gripped in a deep political crisis which could have repercussions for the Eurozone. The country entered into a bailout agreement back in 2011, worth EUR 78 billion. In order to qualify for the bailout funds, Portugal agreed to implement tough austerity measures. However, the economy has not bounced back as hoped, as Portugal been stuck in a recession for three years and unemployment is at a staggering 18%. Finance Minister Vitor Gaspar, who has been in charge of the austerity drive, shocked the markets by resigning on Monday, and the crisis has intensified with the resignation of the Portuguese foreign minister. The crisis has already had an economic impact. Stock markets in Europe have dropped, and the yield on Portuguese ten-year bonds has jumped to 7.5%, driving up the country’s borrowing costs. Portuguese Prime Minister Pedro Passos Coelho is putting on a brave face, saying that he is confident that the government will retain its majority.
Spanish data has been a pleasant surprise this week. The week started with Spanish Manufacturing PMI rising to the 50-point level for the first time since in two years. Spanish Unemployment Change sparkled, dropping by 127.2 thousand. This easily beat the estimate of -83.5 thousand. The markets had expected a strong seasonal reading, but the release exceeded all expectations. There was more good news on Wednesday, as Spanish Services PMI showed a slight gain, and matched the estimate of 47.8 points. Further strong releases from Spain will be very welcome news and could boost the euro.
Is the Greek bailout in trouble? Eurozone officials are displeased over the lack of progress by Athens in implementing the bailout conditions. The next installment of bailout funds amounts to some EUR 8.1 billion, but will require approval from Greece’s creditors – the ECB, EU and IMF. There is concern that Greece has been lagging behind in restructuring its public sector and enacting budget cuts. Greece has been given until the end of the week to assure its creditors that it is keeping its end of the bargain, or the next tranche of bailout funds could be withheld. Eurozone financial ministers meet on July 8, and the Greek bailout will be high on the agenda.
EUR/USD for Thursday, July 4, 2013
EUR/USD 1.2999 H: 1.3020 L: 1.2984
EUR/USD continues to trade very close to the 1.30 line, as the pair tests this significant level. The next line of resistance is at 1.3050. On the downside, there is support at 1.2943. The pair broke below this line on Wednesday, so it cannot be considered safe. There is strong support at 1.2844. This line has held firm since the end of May.
- Current range: 1.2943 to 1.3000
Further levels in both directions:
- Below: 1.2943, 1.2844, 1.2751 and 1.2696
- Above: 1.3000, 1.3050, 1.3100, 1.3162, 1.3271 and 1.3353
OANDA’s Open Positions Ratio
The EUR/USD ratio is back in action on Thursday, pointing to movement towards short positions. This is consistent with what we are seeing from the pair, which has edged lower. The ratio has a majority of short positions, reflecting trader bias towards the US dollar posting more gains.
EUR/USD is trading close to the 1.30 line, and has stayed closed to this level for much of the week. We could see some volatility from the pair after the ECB rate announcement and press conference, hosted by ECB president Mario Draghi.
- 8:57 French 10-year Bond Auction. Actual 2.32%
- 9:00 Eurozone Final GDP. Actual -0.3%.
- 11:45 ECB Minimum Bid Rate. Estimate 0.50%.
- 12:30 ECB Press Conference.
*Key releases are highlighted in bold
*All release times are GMT