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EURUSD: bears gearing towards 1.12


On Wednesday the 5th of June, the euro closed the day down against the US dollar. The bulls erased all their gains after having pushed the EURUSD pair up to 1.1306. The euro was sunk by the European Commission launching an infringement procedure against Italy over its level of public debt. EU Commissioner Pierre Moscovici, however, has said that the situation could change based on new data and certain assurances given from Italy. Additional pressure was exerted on the euro by US data.

Figures released in the US were ambiguous, which allowed the euro to rise above 1.13 before dropping. The ADP employment report showed 27k new jobs added in the private sector in May (forecast: 185k, previous reading: 271k). This was significantly lower than expected, but dollar bulls were lifted by services PMI data, which came out at 56.9 points (previous reading: 55.5).

The euro then dropped all the way to 1.1220.

Day’s news (GMT 3):

  • 12:00 Eurozone: GDP (Q1), unemployment change (Q1).
  • 14:45 Eurozone: ECB interest rate decision.
  • 15:30 Eurozone: ECB monetary policy statement and press conference.
  • 15:30 US: nonfarm productivity (Q1), unit labor costs (Q1), initial jobless claims (31 May).
  • 15:40 US: Fed’s Kaplan speech.
  • 17:00 Canada: Ivey PMI (May).
  • 20:00 US: Fed’s Williams speech.

Current situation:

Expectations of a test of 1.13 were met. At the time of writing, the euro is trading at 1.1228. There’s no chart in today’s review because there’s an interest rate decision coming from the ECB later in the day followed by a press conference with Mario Draghi. The bank is expected to announce a package of long-term loans to commercial banks at very low rates. A negative interest rate has not been ruled out.

The EURUSD pair is trading at the 67th degree. There’s a risk of sliding to 1.1200 ahead of today’s press conference. It’s difficult to say where the pair will close the day, because markets behave unpredictably when Draghi is speaking. If we look at the pricing model created over the last two days, we might consider buying from the 90th degree at 1.1200. Considering that the payrolls report comes out tomorrow, however, I think it better to wait on the sidelines until Monday.

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