Even before yesterday some of the upward momentum that had been underpinning the single currency in recent days had started to ebb away. Yesterday’s disappointing economic data continues to raise fears about a Eurozone recovery with below par PMI’s, and slumping retail sales data.
Renewed concerns about Italy hadn’t helped either, where services are showing signs of contraction, in the face of some budget tightening and political uncertainty.
So the single currency slipped further back when Moody’s decided to announce that it was downgrading Portugal’s rating by four notches to junk status “Ba2” and putting it on negative watch, stating that in its opinion, that the country would need a second bailout.
Today’s meeting of international banks in Paris will now take on an even greater importance in the light of yesterday’s move, given that concerns about restructuring had until now only been confined to Greece. Moody’s move yesterday certainly doesn’t make life any easier for the banks, or the politicians.
In economic data out later German factory orders for May are expected to fall by 0.5% from April’s 2.8% rise, reducing the annualised rate to 9.5%.
The pound has managed a small rebound in the last 24 hours after services PMI surprised to the upside, coming in at 53.9 against expectations of 53.5, and in stark contrast to the European numbers which missed on the downside.
Today’s BRC shop prices index for June came in at 2.9% up from May’s 2.3% rise, highlighting the continued upward pressure on prices, currently constraining consumer demand, while Halifax house prices for June are expected to come in flat.
In the US non-ISM manufacturing data for June is expected to continue the theme of weaker economic data slipping back to 53.7 from May’s 54.6.
EURUSD – the euro continues to lose momentum unable to rally break back through the 1.4520 area, and break the broader resistance area between 1.4550 and 1.4570, which is 61.8% of the 1.4940/1.3970 down move could well see a return to the 1.4700 area, and the highs this year at 1.4940.
The move below 1.4450 has seen the single currency slip back towards the 55 day MA at 1.4412; however it needs to break below it to open up the next move.
A daily close below the 55 day MA at 1.4412 could well see the single currency break test back towards the 1.4320/30 area and retest the key trend line support at 1.4150/60 from the May lows at 1.3970.
GBPUSD – the pound continues to find upward momentum beyond the 1.6120/30 area difficult to sustain, while support below 1.6000 continues to hold, and therefore it looks as if the recent range could well continue. A break of 1.6120/30 could well see further gains towards 1.6200; while below the 1.5980 area retargets the lows of earlier this week around 1.5910 as well as the 1.5880 area which is the 61.8% retracement of the 1.5340/1.6745 up move.
EURGBP – yesterday’s break below the 0.9000 area could well be a critical factor in the start of a deeper correction lower.
In the short term it seems we could well have seen the highs. The next support can be found around the 0.8970/80 area which was the early June highs. A pull back beyond 0.9010 would re-target 0.9050.
It would need a sustained break back below the 0.8940 area to shift the focus back towards 0.8850.
USDJPY – it’s becoming a challenge to try and say the same thing but in a slightly different way every day but the same levels continue to compress the price action here.
As far as the recent range is concerned it’s as you were with the 55 day MA at 81.10 and last week’s highs at 81.30 continuing to cap. A break above 81.30 is needed to signal the next leg higher towards the May highs at 82.00.
For now the 80.00 level remains fairly solid support while a slide below 79.80 could well see a re-test of the May lows at 79.50.