• The higher lows and higher highs pattern has been printing since February.
  • The bullish momentum pushed the EURUSD above mid-2015 levels

Last week CFTC leveraged positioning data for the week ending 25 July revealed, funds were net sellers of EUR.

According to ANZ research, “net long EUR positions by USD0.5bn to USD0.9bn”

UBS reported in the FX flows report, “EUR most sold”.

 FUNDAMENTAL NEWS

Euro area Q2 GDP release and ISM manufacturing index and July US employment report are the key risk events of the week.

 Review of the previous week data:

  • France Flash Manufacturing PMI increases to 55.4 (54.8 in June) 75-month high.
  • France Flash Services Activity Index falls to 55.9 (56.9 in June), 6-month low.
  • Flash Germany Manufacturing PMI at 58.3 (59.6 in June). 3-month low.
  • Flash Germany Services PMI Activity Index at 53.5 (54.0 in June). 6-month low.
  • Flash Eurozone Manufacturing PMI at 56.8 (57.4 in June). 3-month low.
  • Flash Eurozone Services PMI Activity Index at 55.4 (55.4 in June).
  • Germany IFO Business Climate index rose to 116.0 vs. 115.2.
  • GfK German Consumer Climate 10.8 vs 10.6.
  • Germany CPI expected to increase by 0.4% on June 2017.
  • Euro area annual inflation stable at 1.3%
  • Euro Area unemployment rate was 9.1% in June 2017, down from 9.2% in May 2017.

Upcoming data:

  • Tue, Aug 01

Germany Final Manufacturing PMI

EA Prelim Flash GDP QoQ basis

Credit Suisse: GDP release should show output grew by 0.7%q/q in the second quarter.

  • Wed, Aug 02

July ADP Non-farm employment change

  • Thu, Aug 03

EA services PMI

ISM Non- Manufacturing PMI

Credit Suisse: We expect a slight moderation of ISM manufacturing to 57.5

  • Fri, Aug 04

July US employment report

Credit Suisse: We expect payrolls growth to maintain its strong trend in July, with headline job gains coming in at 210K.

We expect the unemployment rate to drop to 4.3% after ticking up slightly in June.

We expect wage growth can rise somewhat in the months ahead and forecast a small pickup to 0.3% MoM.

BNP PARIBAS:  We expect 205k nonfarm payrolls jobs to be added in July, with the unemployment rate likely to decline to 4.3% from 4.4%.

We forecast that a 0.2% m/m increase in average hourly earnings will take the y/y change down to 2.3% from 2.5%.

 TECHNICAL ANALYSIS

EURUSD break through the multi-year descending trend line and settles above mid-2015 levels. It continues to rally strongly above the trend line finally headed to the resistance zone seems between 1.1875/1.1900 and 1.2040. Last week it saw a strong finish and on a monthly basis rose nearly 4%.

A breakout above 1.2040 July 2014 low, expected to extend 1.2150 50.%  (1.3992-1.0340 fall) and 1.2290 its 100.fe (monthly)/1.2330 October 2008 low. On the monthly chart, the oscillator appears inverted H&S pattern aiming at 1.24/1.2500.

It has been moving higher for five straight months, challenging 50MA (monthly) for the first time since August 2014. Since 2008, there were two occasions it has moved higher for five straight months and 1 time recorded for six straight monthly gains (below chart).

The daily RSI indicates overbought. If fails at the resistance zone, focus shifts to 1.1720/1.1680 and 1.1620/1.1580 levels.

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

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