On Tuesday, trading on the euro/dollar pair closed down. The price fell from a high of 1.1845 to 1.1786 (-59 pips). Volatility surged after the release of the second wave of US data. The ISM manufacturing index for the US in July turned out lower than expected and fell from the previous month’s value.
The euro didn’t continue its growth due to a collapse in oil prices during the US session. This drop weighed down on the Canadian dollar, through which pressure was exerted on the other major currencies.
The drop in oil prices started during the European session, when the US dollar strengthened as part of a correction. The price falling below 52.30 USD marked a breakout of the trend line. The price accelerated downwards to 50.86 USD on the back of a report from Reuters that OPEC countries have increased their production for the 5th month in a row in violation of the agreement reached in December.
The cartel increased production by 90,000 barrels a day in July. Most of this volume came from Nigeria and Libya, who are exempt from quotas.
The euro rate jumped from 1.1786 to 1.1837. Here, buyers decided to take advantage of the sharp drop in US 10Y bond yields from 3.01% to 2.251%. This time, though, they didn’t manage to nurture this bullish impulse and the price returned to 1.18.
- ISM manufacturing PMI (Jul): 56.3 (forecast: 56.5, previous: 57.8).
- Construction spending (Jun): -1.3% (forecast: 0.4%, previous: 0.3%).
- Core personal consumption expenditure – price index (MoM) (Jun): 0.1% (forecast: 0.1%, previous: 0.1%).
- Core personal consumption expenditure – price index (YoY) (Jun): 1.5% (forecast: 1.3%, previous: 1.5%).
- Personal income (Jun): 0.0% (forecast: 0.4%, previous: 0.3%).
- Personal spending (Jun): 0.1% (forecast: 0.1%, previous: 0.2%).
Day’s news (GMT 3):
- 10:15 Switzerland: real retail sales (YoY) (Jun).
- 10:30 Switzerland: SVME PMI (Jul).
- 11:30 UK: PMI construction (Jul).
- 12:00 Eurozone: PPI (Jun).
- 15:15 USA: ADP employment change (Jul).
- 17:30 USA: EIA crude oil stocks change (28 Jul).
EURUSD rate on the hourly. Source: TradingView
During Asia’s trading, the price has missed the balance line by 4 pips. The euro has risen against the greenback from 1.1790 to 1.1830. The New Zealand dollar turned out to be the centre of attention for traders. After a labour market report from New Zealand on the second quarter, the kiwi fell 0.5% against the greenback. Traders reacted to the drop in unemployment by selling. The euro was propped up through the crosses. The euro/pound cross also favoured buyers.
The situation is contradictory at the moment, so my prediction only goes up to the US session.
What’s bothering me now? The euro has undergone a correction. The pair has rebounded from the zone where the LB runs through and the 45th degree at the 1.1845 high. US bond yields have fallen and are now reluctantly growing. So, the conditions for hitting a new high have been filled. The franc, Aussie, kiwi, loonie and yen are all trading down. If they don’t reverse upwards, the euro will follow them downwards. So, now we need to keep an eye on what kind of trading volume we’ll see when trading below the 1.1830 resistance (projection of the line from H: 1.1845 and H: 1.1839).
The market is mostly focused on Friday’s nonfarm payrolls report for June. So, the most significant data set to come out on Wednesday is the ADP report on employment change. The heads of the San Francisco and Cleveland Feds; John Williams and Loretta Mester, are set to speak later today.