EUR/USD Analysis – Euro/Dollar News – Forecast 28th June
- Euro summit output seen as key – market participants reluctant to sell EUR prior to this event risk.
- Employment data in focus from Europe’s largest economy – Germany.
- The EUR/USD is broadly flat today, trading just under the $1.25 handle for the majority of the day.
- It is widely anticipated that Italian PM Mario Monti is to propose the utilisation of Eurozone bailout funds to help ease borrowing costs, through the purchasing of debt in the open market, according to a recent Financial Times report. This is despite the policy receiving a negative response from the Bundesbank after it was revealed last week.
- From a higher timeframe perspective the EUR/USD currency pair looks to be trading in a corrective move higher; resistance is still seen around the 1.2500 level with 1.2650 showing price pivot tendencies when hit recently.
- Italian six-month costs to borrow have risen to 2.95% during an auction today, this is the highest level since December.
- It is interesting to note the strong reactions seen at 1.3000 and then 1.2750. A continuation of this 250 pips sequence could yet see the 1.2250 area acting as a pivotal area in the weeks ahead in the event of a drop, perhaps on the higher timeframe monthly or weekly basis. 1.2287 is the lowest level hit recently and was 37 pips shy of a 1.2250 touch – the subsequent bounce was to 1.2750.
- A strong extension to the downside could potentially be seen if the prior lows around 1.2300 were taken out on a major “risk-off” bearish decline; this is always a background possibility considering the current fundamentals in Europe, but is a scenario that is difficult to preempt.
German unemployment change data is due tomorrow. This will show the change in the number of unemployed people in Europe’s largest economy during June; the figure is forecast to increase by around 3K. Employment is often seen as a lagging indicator but the level of those who are unemployed provides an insight into the economic health of a nations spending from consumers. Many Euro-zone nations have seen unemployment rise as austerity measures were implemented. The chart below shows german unemployment is one of the lowest in Europe and any divergence from this could weigh on the euro. The release is due at 7:55 GMT.