Euro Hovers Near Support as Momentum Turns Higher
EUR/USD dropped back below 1.3600 with the unexpected decline in European PMI data eliciting euro selling. German PMI came in south of expectations as well, especially the services reading. EURJPY has been a relatively big mover, dropping below Friday’s lows at 138.54, with stop selling helping fuel the move.
Eurozone PMIs disappointed again in June, with the manufacturing reading falling to 51.9 from 52.2 and the services reading to 52.8 from 53.2. This left the composite at 52.8, down from 53.5 in the previous month.
National readings were also mostly down with the French PMIs falling further below the 50 point no change mark and the German services reading also falling markedly to 54.8 from 56.0 in the previous month. Only the German manufacturing PMI managed to carve out a marginal gain at 52.4, which was up from 52.3 May. More negative survey news again, although with the ECB awaiting the impact of its latest round of easing measures this does not change the overall policy outlook.
ECB’s Draghi hints rates could stay low until end 2016. Draghi told Dutch newspaper De Telegraaf that the ECB has “prolonged banks’ access to unlimited liquidity up to the end of 2016. That is a signal”. He added that the ECB’s “program in support of bank lending to businesses will continue for four years. That shows that interest rates will remain low over a longer period. The comments suggests that there won’t be any rate hikes at least until the end of 2016 and maybe for the full 4 years the new program will run.
The EURUSD currency pair dipped but remains above support near the 10-day moving average at 1.3565. Momentum is positive as the MACD (moving average convergence divergence) index generated a buy signal, as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread.
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