Weak Data And Geopolitical Tensions Hit The EUR
- The EUR was under pressure of weak German macroeconomic data and rising geopolitical tensions and the USD was supported by strong ISM Services and factory orders readings.
- German industrial orders fell by 3.2% mom. Median market forecast assumed an increase by 1.0% mom. A breakdown of data showed foreign orders slumped by 4.1% mom and domestic orders went down by 1.9% mom. The Economy Ministry said that main reasons for more cautious ordering were geopolitical developments and risks. Factories producing capital goods recorded 6.4% fewer orders in June mom. Orders for consumer goods declined by 0.4% mom and orders for intermediate goods registered a rise by 1.6% mom.
- Polish Prime Minister Donald Tusk said on Wednesday that he had reasons to suspect that the threat of a direct intervention by Russia's military in Ukraine has risen over the last couple of days.
- ISM Services amounted to 58.7 in July vs. 56.0 in June (above our forecast of 56.5 and market consensus of 56.3). Orders for manufactured goods increased 1.1% mom (above our forecast of 0.8% and market consensus of 0.6%). Orders for non-defense capital goods excluding aircraft, which is a measure of business confidence and spending plans, increased by 3.3% mom, a record high.
- The EUR/USD bears pushed the rate down to new 2014 lows at 1.3349. Then the rate rebounded to 1.3374 but during European session reached as low as 1.3331. The EUR/USD reached our target of 1.3335. We have taken profit on our 1.3433 position.
- The main event for the EUR/USD rate is the ECB meeting tomorrow. We do not expect the ECB to take any action and in our opinion Mario Draghi is likely to strike a dovish tone which will not support the EUR.
Significant technical levels:
Resistance: 1.3377 (session high Aug 6), 1.3398 (hourly high Aug 5), 1.3425 (high Aug 5)
Support: 1.3330 (30-day Bollinger), 1.3318 (low Nov 8, 2013), 1.3295 (low Nov 7, 2013)
- A fall of the NZD/USD rate during Asian session put pressure on the AUD/USD today. The rate broke below 0.9300 for a while. The next support level is at 0.9272, breaking which will open the way towards May lows 0.9205/0.9210.
- Our short position is in a good shape now. Our target is near May lows (0.9210). However, a deeper move towards the 200-dma cannot be excluded. We have moved our stop-loss level to 0.9345 to reduce the risk.
- Important macroeconomic figures will be released today in the evening EDT (employment change and unemployment rate). Markets are waiting for quarterly statement of monetary policy from the RBA on Thursday 21:30 EDT.
Significant technical levels:
Resistance: 0.9344 (high Aug 5), 0.9388 (high Jul 30), 0.9416 (high Jul 29)
Support: 0.9272 (low Aug 1), 0.9257 (low Jun 5), 0.9229 (low Jun 3)
Our current trading positions:
AUD/USD: short at 0.9330, target 0.9210, stop-loss 0.9345 (we have adjusted stop-loss from 0.9380 previously).
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