EUR/USD July 4 – Steady Ahead of ECB Rate Decision

EUR/USD  continues to  trade close the 1.30 line  in  Thursday’s European session. US markets are closed for the July 4th holiday, but we could see some volatility from the pair, as the ECB announces its benchmark interest rate. The rate is expected to remain pegged at 0.50%, but the accompanying press conference has proven to be a significant market-mover in the recent past. There are only two releases on today’s schedule. Eurozone Final GDP looked weak, posting its fourth straight decline. French 10-year bonds were up slightly, with an average yield of 2.32%.

Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.

EUR/USD Technical

• Asian session: Euro/dollar edged below the 1.30 line, touching a  low of 1.2988  and consolidating at 1.2988. In the European session, the pair is testing 1.3000.

Current range: 1.3000 – 1.3050.

Further levels in both directions:  

• Below: 1.3000, 1.2940, 1.2890, 1.2840, 1.28, 1.2750  and  1.27.
• Above: 1.3050, 1.3100, 1.3160, 1.32, 1.3255, 1.3350, 1.34, 1.3434 and  1.3480.
• 1.3050 is providing weak resistance.  1.3100 is next.
• On the downside, the pair is testing 1.3000. This is followed by 1.2940.

Euro  remains close to 1.30 line ahead of ECB rate announcement  – click on the graph to enlarge.

EUR/USD Fundamentals

• 8:57  French 10-year Bond Auction. Actual 2.32%
• 9:00 Eurozone Final GDP. Actual -0.3%.
• 11:45 ECB Minimum Bid Rate. Exp. 0.50%.
• 12:30 ECB Press Conference.

For more events and lines, see the  Euro to dollar forecast.

EUR/USD Sentiment

• Markets wait for ECB Rate Decision: The ECB cut interest rates in May to a record low of 0.50%, and despite continuing economic problems in the Eurozone, the ECB is not expected to cut the rate. Mario Draghi will host a press conference, and the head of the ECB has often made comments that have caused volatility in the markets. Earlier this year, Draghi raised the idea of negative interest rates for deposits, and the euro lost ground as a result. So we could see some activity from the pair on Thursday, even with the US markets closed for the July 4th holiday.
• US releases solid employment numbers: US employment data has looked solid this week. ADP Non-Farm Payrolls, an unofficial
  release which precedes the government release on Friday,  posted a  gain of  188 thousand, its best showing since March. The estimate stood at 161 thousand. Unemployment Claims, which were released ahead of the July 4th holiday, came in at 343 thousand, slightly below the estimate of 345 thousand. The markets will get another look at the US labor market on Friday, with the release of Non-Farm payrolls and the Unemployment Rate.
• Political crisis grips Portugal:  It seems we can’t go for very long without a  political crisis somewhere in the Eurozone. This time it’s Portugal, where  the government is struggling to hold together. The country has been struggling with austerity measures as part of its bailout program, and the government  was been rocked by the resignations of the finance and foreign ministers on Tuesday. With the country mired in the third year of a recession and unemployment at 18%, talk of a Euro-exit is bound to increase, which is bad news for the shaky euro.
• Spanish Employment Numbers Sparkle: It’s been a solid week for Spanish releases. The week started with Spanish Manufacturing PMI rising to the 50-point level for the first time since in two years. Spanish Unemployment Change was outstanding, dropping by 127.2 thousand. This easily beat  the estimate of -83.5 thousand. The markets had expected a strong seasonal release, but  this  drop clearly beat all expectations.  On Wednesday, Spanish  Services PMI  came in at  47.8 points, matching the forecast. This was in contrast  to the Italian and Eurozone Services PMIs, which both fell short of their estimates.
• Greek bailout negotiations continue: The Greek bailout may have reached a snag,  as  officials in the Eurozone are voicing dissatisfaction with the lack of progress by Athens in implementing the bailout conditions, including budget cut shortfalls and  cuts to the bloated public service. The next installment  of  bailout  funds amounts to some EUR 8.1 billion, but  these funds will not be delivered until the  troika gives the go-ahead. Eurozone financial ministers meet on July 8,  and the  Greek bailout  could be  back in the news next week if an agreement is not reached.