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Despite very mixed manufacturing PMI numbers across the Euro Zone this morning and no material sign of unemployment improving, EUR/USD is still determined to test the psychological 1.3700 level which has shown resilience on a couple of occasions so far this year.
A wave completion in the coming days has the potential to take the market up to 1.3710, beyond this the risks of a reversal greatly increase but any continuation of bullish momentum will be met with a challenge from the 100 day MA at 1.3739.
A struggling EUR in the mid 1.37’s is a clue to an impending sell off and a valid sign that a break back below 1.36 is on the cards, support should be strong around the 1.3574 level but the move is unlikely to be considered complete until closer to the mid 1.33’s, EUR bulls should be looking for buying opportunities around 1.3350.
Soft data from Europe in this environment has the unnatural effect of encouraging EUR buying. The ECB has effectively back-stopped the Euro zone economy with it’s commitment to ‘do everything necessary’. Yesterday’s uninspiring preliminary inflation data has all but ensured the instigation of a significant bond purchase program. The question is round the timing of this.
Thursday (July 3rd) is a major risk event day for this currency pair. The ECB is on the brink of quantitative easing, although the Governing Council meeting is unlikely to herald action this month, pertinent rhetoric can be expected from the ensuing press conference.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
