EUR/USD – German and Eurozone Mfg. PMIs Meet Expectations, but Euro Dips

The euro has started the week with slight losses. Currently, the pair is trading slightly below the 1.14 level. On the release front, German Manufacturing PMI edged up to 59.6, beating the estimate of 59.3. The Eurozone Manufacturing PMI improved to 57.4, beating the forecast of 57.3. In the US, today’s highlight is the ISM Manufacturing PMI, which is expected to edge up to 55.0.

It was a banner week for the euro, as EUR/USD jumped 2.0%. The currency was boosted by comments from ECB Governor Mario Draghi at the ECB forum in Portugal. Draghi restated the obvious when he gave an upbeat assessment of the eurozone economy, but the markets jumped on his comments about inflation. Draghi said that “deflationary forces have been replaced by reflationary ones” and added that the ECB’s stimulus program was needed for now, but would be gradually withdrawn once inflation moved higher. One could make the argument that Draghi was not breaking any new ground, but the markets seized on Draghi’s remarks as a declaration that the ECB was planning to tighten policy. After the euro jumped, the ECB tried to backtrack, with ECB sources saying that the markets had “misinterpreted” Draghi’s remarks. However, the markets shrugged this off, and positive sentiment could mean that the euro rally will continue this week.

There was no getting around the fact that the US economy slowed down in the first quarter, but there was some good news, as the revised GDP reading was raised to 1.4%, better than the initial estimate of 1.2% in May. The improvement was attributed to stronger consumer spending and an increase in exports. Earlier in the year, the markets were braced for a very poor quarter, with the first estimate in April projecting a gain of only 0.7%. Inflation remains stubbornly low, and consumer spending is also soft, despite high consumer confidence levels. In May, Personal Spending softened to 0.1%, down from 0.4% a month earlier. If inflation levels don’t show some improvement, the Federal Reserve may have second thoughts about a December rate hike.

EUR/USD Fundamentals

Monday (July 3)

• 3:15 Spanish Manufacturing PMI. Estimate 55.6. Actual 54.7
• 3:45 Italian Manufacturing PMI. Estimate 55.3. Actual 55.2
• 3:50 French Final Manufacturing PMI. Estimate 55.0. Actual 54.8
• 3:55 German Final Manufacturing PMI. Estimate 59.3. Actual 59.6
• 4:00 Eurozone Final Manufacturing PMI. Estimate 57.3. Actual 57.4
• 4:00 Italian Monthly Unemployment Rate. Estimate 11.1%. Actual 11.3%
• 5:00 Eurozone Unemployment Rate. Estimate 9.3%. Actual 9.3%
• 10:00 US ISM Manufacturing PMI. Estimate 55.0
• 10:00 ISM Construction Spending. Estimate 0.3%
• 10:00 US ISM Manufacturing PMI. Estimate 58.5
• All Day – US Total Vehicle Sales

*All release times are EDT

*Key events are in bold

EUR/USD for Monday, July 3, 2017

EUR/USD Monday, July 3 at 6:50 EDT

Open: 1.1425 High: 1.1427 Low: 1.1375 Close: 1.1383

EUR/USD Technical

EUR/USD was flat in the Asian session and has posted losses in European trade

• 1.1366 is providing weak support
• 1.1465 is the next line of resistance

Further levels in both directions:

• Below: 1.1366, 1.1242, 1.1122 and 1.0985
• Above: 1.1465, 1.1534 and 1.1616
• Current range: 1.1366 to 1.1465

OANDA’s Open Positions Ratio

EUR/USD ratio is unchanged in the Monday session. Currently, short positions have a majority (74%), indicative of EUR/USD continuing to move lower.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.