The single currency could get back to be traded around 1.30 psychological level by the ECB interest rate decision today and the press conference of its president Draghi which always follow it indicating its economic assessment to the current economic stance and its outlook.
The inflation which usually directs the ECB have come out recently showing that it has risen in June as the flash reading consumer price index of it has come at 1.6% from 1.4% in May from its bottom at 1.2% in April which encouraged the ECB to cut the interest rate by 0.25% to be at 0.5% while it is well known that that inflation yearly target of the ECB stands at 2%.
While the economic stance has not shown yet a substantial improving but just looking for a gradual pace of recovery from the current recession which has extended more than what was expected by the ECB itself which lowered its expectation of it this year 2 times this year and it is expected to show before today’s ECB meeting shrinking in the first quarter as the recent reading by 0.2% q/q and 1.1% y/y after shrinking also in the fourth quarter of last year by 0.6% q/q and 0.9% y/y while the unemployment in EU is still rising recording a new high in May at 12.2% from 12.1% in April.
We have seen also that there are improvements in the service and manufacturing sectors despite of EU PMI data of them which came lower than expected in June driving EU PMI composite to go up to 48.7 from 47.8 while the market was waiting for 48.9 but suggesting also that there is no expected easing movement to come today from the ECB which can see that it has a room to wait and see.
From another side, there can be a reference to a reaction by the ECB to the recent EU bonds yield which have grown up in a significant way recently following the US ones which reacted positively to the increasing expectations of having a Fed’s decision of cutting its monthly buying while the labor market is still giving positive signs can lead to falling of the unemployment rate below 7% and increasing of the economic growth momentum later next year by God’s will as what are mostly expected by the market participants currently.
So, the market will be closely watching the release of US Labor report of June this Friday which expected to show rising of the US non-farm payroll by 165k from 175k in May and decreasing of the unemployment rate to 7.5% from 7.6% in May after US ADP employment change of June came yesterday showing adding 188k Jobs while it was expected to add 160k from 134k in May.
By God's will, EURUSD can face now in the case of rising further resisting levels at 1.3031, 1.3102, 1.3150, 1.3253, 1.3305, 1.3433, 1.3519, 1.3598 before 1.3709 which has been reached in the beginning of last February after US non-farm payrolls of Jan which has shown adding 157k jobs has been revised down later to 119k following avoiding of the fiscal cliff in the beginning of this year supported the risk appetite in a remarked way while getting down from here can be supported again by the expectation of trimming the Fed’s monthly buying and can be met by supporting levels at 1.2918, 1.2837. 1.2820, 1.2796, 1.2734 before 1.2661 again whereas it could rebound after the market worries about Greece got down while breaking it too can lead to another supporting level at 1.2464.
Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
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