Euro drifting continues

The euro is showing little movement for a second straight day. In the North American session, EUR/USD is trading at 1.0187, up 0.14% on the day.

With a light economic calendar today in both the US and Europe, the euro is likely to continue to have a quiet day. Investors shrugged after a soft reading from German Factory Orders earlier today, with a decline of 0.4% in June. This was better than the forecast of -0.8% but lower than the May reading of -0.2%(revised from +0.1%).

German Factory Orders have now posted declines for five straight months, reflecting prolonged weakness in the manufacturing sector. Earlier this week, German Manufacturing PMI slipped into contraction territory for the first time in over two years, with a reading of 49.3. German manufacturing has been hurt by the slowdown in the global economy, and the slowdown in manufacturing is reflected in these two indicators. This raises concerns about the strength of the German economy, as well as the entire eurozone, as Germany is a bellwether for the rest of the bloc.

It is a stretch to paint an optimistic picture for Germany and the eurozone, with the war in Ukraine dragging on and a possible energy crisis courtesy of Russian President Putin. Inflation in the eurozone shows no signs of peaking and the ECB is playing catch-up, having finally raised interest rates last month for the first time in a decade. Russia has demonstrated that it is willing to weaponise its energy exports, and that could lead to an energy shortage ahead of winter, which is only a few months away.

EUR/USD Technical

• EUR/USD is testing resistance at 1.0194. Above, there is resistance at 1.0291
• There is support at 1.0130 and 1.0033

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