• The ECB President Mr Draghi sounded optimistic on the EU growth outlook.
  • EU growth outlook has improved and markets are preparing for higher interest rates.
  • The ECB was likely to start winding back its bond-buying program as early as September.

 

FUNDAMENTAL NEWS

Following the hawkish interpretation of President Draghi’s speech markets have brought forward the first ECB’s rate hike to 2018 September.


Review of the previous week data:

  • German Ifo Business Climate 115.1 vs 114.6
  • The annual growth rate of the broad monetary aggregate M3 stood at 5.0% in May 2017, after 4.9% in April 2017.
  • GfK predicts an increase in consumer climate of 0.2 points to 10.6 points for July compared to the previous month.
  • Germany consumer prices are expected to increase by 0.2% on May 2017.
  • Germany May turnover was in real terms 0.5% and in nominal terms 0.3% larger than that in April 2017.
  • Euro area annual inflation down to 1.3%.
  • Spanish manufacturing sector rose to 7, signals further solid expansion at end of Q2.
  • Italy Manufacturing PMI improves slightly to 55.2, sees a strong finish to 2Q.
  • French Manufacturing sector posted8 in June to signal a further improvement.
  • Germany Manufacturing PMI rose for the sixth time in seven months in June, posting 59.6, up from 59.5 in May.
  • Final Eurozone Manufacturing PMI at 57.4 in June, hits a 74-month

Upcoming data:

 

  • Tue, July 04

EZ PPI: Downside surprise expected

  • Wed, July 05

Italy Services PMI: Ease slightly

UniCredit: We expect the services PMI to ease slightly in June, to 54.8.

EZ  Retail sales: Upside surprise expected 0.4% vs 0.1%.

  • Thu, July 06

ECB Monetary Policy Meeting Accounts.

  • Fri, July 07

Germany IP

UniCredit: We expect industrial production to decelerate in May to +0.1% mom.

French IP

UniCredit: We forecast a 0.7% mom increase, after -0.5% mom in April.

In the U.S we got FOMC meeting minutes of the June 14 FOMC meeting and NFP. As the week pack with high-risk events, volatility will be higher than normal trading conditions.

  • FOMC meeting minutes (July 5)

Market participants look for clues on the next rate hike hints and beginning of the balance sheet normalization.

  • NFP (July 07)

UniCredit forecast “Nonfarm payrolls likely rose a more solid 170,000 in June and the jobless rate likely stabilized at 4.3%”.

According to Barclays, “We expect nonfarm payrolls to rise by 185k in June. We look for average hourly earnings to increase by 0.3% m/m (2.6% y/y), a faster increase than in the previous month”.

 

FX POSITIONING:

Following the hawkish interpretation of President Draghi’s speech, funds turned bullish on the EUR.

ANZ Research reported the CFTC leveraged positioning for the week ending 27 June 2017, “Leveraged funds reduced their net short EUR positions by USD1bn to USD1.5bn”.

SEB reported Investors were net buyers of EUR against the dollar.

 

TECHNICAL VIEW

It has off nearly 10% from Jan 2017 low, trading on a verge of 22-month descending trendline.

Before retracing to 1.1355 on Monday session, EURUSD spotted with a double top at 1.1445. It has parallel resistance seems at 1.1465 above this 1.1500 and 1.1535 are next in line. For intraday trading purpose resistance seems at 1.1390/1.14 and 1.1465.

Alternatively, support finds at 1.1350 and 1.1290/1.1270. Settles below 1.1290/1.1270 the selling pressure accelerates to 1.1210/1.1210 and 1.1100 in the near term.

This week’s trading range remains between 1.1535 and 1.1270. We can expect a near-term top around 1.1535 levels.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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