EUR/USD: Pair Drops Below $1.09, Remains Under Pressure
Existing home sales for June printed 5.49 million, up from last month's downwardly revised 5.32 million, which represents a 3.2% growth month-on-month, the National Association of Realtors advised on Wednesday. The figure beat analysts' estimates.
Moreover, the house price index remained at 0.4% in June. Numbers were positive and added some strength for the greenback. Shortly after the release, the pair was briefly dipping below the $1.09 handle, around 0.5% lower on the day.
As for the rest of the macro updates later this week, investors will closely watch initial jobless claims on Thursday, which is set to prolong its stay below the 300,000 threshold for the twentieth straight week. Meanwhile, new home sales are expected to remain almost unchanged at 540,000 according to the market survey.
The Federal Reserve governors meet next week and no changes in monetary policy are expected, although some comments on future steps are likely, with the most focus on the September meeting as the start of the lift-off.
"The July FOMC meeting has no press conference, dots, or economic projections. That leaves us with only the post meeting statement as a means to engage in what is often a suffocating exercise in whether the bias is turning more or less hawkish. What we do know is that the appetite is there to begin raising rates this year. What is less certain is when, though we continue to see September as the high probability outcome. While the minutes of this meeting may prove more powerful in shaping those expectations, we also suspect the statement will be designed to nudge the market further in that direction," Eric Green at TD Securities wrote in a note on Wednesday.
Net non-commercial positions on the euro were at -108,000 on Tuesday last week, the CFTC reported on Friday, which means that there is still much space for the shorts to build. Lows in April were at -227,000, shortly after the pair was trading at its cycle lows around $1.05.
EUR/USD rebounded from the resistance level 1.0970 which will give more room for testing back again 1.0820.
EUR/USD dips, as commodities rout provides support for delayed rate hike
EUR/USD fell slightly on Wednesday reversing some of its gains from the previous session, as downward pressure from a sharp decline in commodities provided support for a delayed interest rate hike by the Federal Reserve.
The currency pair traded between a low of 1.087 and a high of 1.0967 on Wednesday, before settling at 1.0927, down 0.10%. EUR/USD closed lower for the fifth time in seven sessions, closing below 1.10 for the seventh straight trading day. The euro is down approximately 4% against its American counterpart since peaking above 1.14 on June 22.
EUR/USD likely gained support at 1.0808, the low from July 20 and was met with resistance at 1.198, the high from July 13.
On Wednesday, gold for August delivery fell more than 0.9% to 1,093.00 an ounce settling below $1,100 for the first time in more than five years. Gold futures have closed lower on 10 consecutive sessions, tying its longest losing skid since 1996. The precious metal is down by approximately 10% since closing above 1,200 an ounce in late-June. The downturn in gold has coincided with the steady fall in crude prices.
WTI crude for September delivery plummeted more than 3.25% on Wednesday to $49.19 a barrel, falling below $50 for the first time since early-April. In its weekly Petroleum Status Report, the U.S. Energy Information Administration (EIA) said U.S. crude inventories rose by 2.5 million barrels for the week ending on July 17. Analysts expected a weekly draw of 2.2 million barrels. Any supply build is viewed as bearish for crude amid a glut of oversupply in global energy markets.
In June, the U.S. Department of Labor's Bureau of Labor Statistics said its headline Consumer Price Index (CPI) in June rose by 0.3% on a monthly basis and 0.1% over the last 12 months. More critically, energy prices on the month rose by 1.7% on the back of a 3.4% spike in the price of gasoline. The Fed has strongly hinted that it could raise rates if it received indications that temporary drags from lower energy prices subsided. Over the last month, however, crude futures have declined by more than 12%.
In Europe, meanwhile, the European Central Bank increased liquidity assistance to Greek banks by €900 million, ahead of a vote by Greek Parliament on Wednesday night. After passing four critical bailout measures last week, the Parliament must ratify two additional measures on Wednesday required by its euro zone creditors to re-open bailout talks. On Tuesday, Greek government officials said they were hopeful that a deal which could unlock €86 billion in stimulus aid could be completed by August 20.
Yesterday the EURUSD pair moved back and forward with lack of direction closing in the red near the open of the day, making a Doji pattern. This candlestick is often used to signal indecision about the future direction of the currency so today a break above its high or a break below its low will set the trend for the day.
The euro recorded a decrease on Wednesday session after fluctuating trade throughout the day. The session started at a price of 1.0933 just before lunch the single currency reached the highest level for the day at 1.0965. In the afternoon the price went down sharply, reaching a daily low at 1.0869. The pair ended the day at 1.0927 and if the direction go downwards, we can expect a break of the support at 1.0817.
Euro rises as Greece progresses on bailout steps
The euro strengthened on Thursday, briefly rising above $1.10 for the first time in a week, as the Greek parliament approved a second set of reforms required to start negotiations with lenders in a bid to avert bankruptcy.
The greenback stalled against other major currencies despite expectations that the Federal Reserve would raise interest rates by year end. The dollar index pared earlier losses on news that domestic weekly jobless claims fell to their lowest level in more than four decades.
Of Athens' latest move towards a bailout, "it's perceived as a positive for the euro. Greece might even be perceived as taking the initiative to revive talks with creditors," Paul Christopher, chief international strategist at Wells Fargo Advisors in St. Louis.
Other analysts downplayed the pop in the euro, as the long-term ability of Greece to stay solvent and keep its membership in the euro zone remains in doubt.
"The market has been short euro. It's not surprising to go through these periodic bouts of (short-covering) squeeze," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.
The euro was last up 0.6 percent against the dollar and yen respectively at $1.0995 and 136.25 yen .
The greenback pared earlier losses versus the yen after the government said first-time filings for unemployment benefits fell to 255,000 last week, the lowest since November 1973. This supported the view of an improving jobs market that may allow the Fed to raise interest rates as early as September.
The dollar was little changed on the day at 123.96 yen , rebounding from a global session low of 123.68 yen.
The dollar index was last down 0.5 percent at 97.08.
EUR/USD is testing for the second day the resistance levels of 1.1000
The PMIs out of Germany, France and the EU may determine the direction of the EURUSD for tomorrow and probably next week.
July 2015 France Markit manufacturing PMI flash 49.6 vs 50.7 exp
July 2015 France Markit manufacturing, services and composite PMI flash data report 24 July 2015
Not a good start for the European numbers as French manufacturing sinks into contraction