Fridays trade saw EUR/USD within the range 1.1066-1.1118. The pair closed at 1.1111, up 0.23% on a daily basis and extending gains from Thursday.
At 9:11 GMT today EUR/USD was down 0.42% for the day to trade at 1.1064. The pair touched a daily low at 1.0970 at the start of Asian trading. It has been the lowest level since June 29th, when a daily low of 1.0953 was registered.
Fundamentals
Euro area
Greece referendum decision
On Sunday it became clear that 61% of the Greek voters said a sonorous “No” to austerity measures, which the European Central Bank, the International Monetary Fund and the European Commission had required on June 25th. The vote makes the future of the country in the common currency zone uncertain and also heightens the risk of a full-blown crisis in the Euro region. Such a result was, to a certain extent, expected by leaders of business entities in the UK, surveyed by the Institute of Directors (IoD). On July 3rd the IoD revealed that 26% of respondents saw the possibility of Greece withdrawing from the Euro zone as “very likely” in 12 months time. An additional 47% supposed that a withdrawal in the upcoming 12 months was “somewhat likely”.
The referendum vote triggered demand for safe haven assets. The yield on Germany’s 10-year government bonds went down six basis points (0.06 percentage point) to reach 0.73% earlier today, which has been the largest drop since June 29th. The Greek bonds have slumped 23% in 2015, according to Bloomberg World Bond Index data. On the other hand, Euro zone bonds have dropped 1.5%.
“The strength of the ‘no’ vote in the Greek referendum comes as a shock to the market, and all safe-haven trades should benefit,” Peter Chatwell, a strategist at Mizuho International Plc in London, wrote in a note to clients yesterday, as reported by Bloomberg.
Following the vote in the referendum, Greek Minister of Finance, Yanis Varoufakis, announced his leave from the Ministry.
“Soon after the announcement of the referendum results, I was made aware of a certain preference by some European participants, and assorted ‘partners’ for my ‘absence’ from its meetings: an idea that the prime minister judged to be potentially helpful to him in reaching an agreement”, according to Varoufakis’s personal blog. “For this reason I am leaving the Ministry of Finance today.”
Greece became the first developed country to skip a payment to the IMF, as it did not observe its USD 1.7 billion obligation during the week ended on July 5th. According to the IMF, the nation is in need of USD 40 billion in the form of international aid as well as less stringent outstanding debt terms in order to manage its financial position.
United States
ISM Non-Manufacturing PMI
Activity in United States’ sector of services probably improved in June, with the corresponding non-manufacturing PMI coming in at a reading of 56.3, according to market expectations, up from 55.7 in May. If so, June would be the 65th consecutive month, when the gauge stood in the area above 50.0. Mays reading has been the lowest one since April 2014, when the PMI came in at 55.2. This is a compound index, based on the values of four equally-weighted components, that comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.
The New Orders Index was at 57.9 in May, down from a reading of 59.2 in April. The Employment Index dropped to a level of 55.3 in May from 56.7 in the prior month, marking activity growth for the 15th successive month. The Prices Index went up to 55.9 in May from a reading of 50.1 in April, which suggested an increase in prices for a third month in a row. The Non-Manufacturing Business Activity Index fell to 59.5 in May from a reading of 61.6 in April, which implied growth for the 70th straight month, but at a slower pace.
The business report is based on data compiled from monthly replies to questions asked of over 370 purchasing and supply executives operating in over 62 different industries, which represent nine divisions from the Standard Industrial Classification (SIC) categories.
Participants can either respond with “better”, “same”, or “worse” to the questions about the industry, in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% or the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of optimism (expanding activity). In case the index improved in value more than anticipated, this would lead to support for the US dollar. The Institute for Supply Management (ISM) is to release the official PMI reading at 14:00 GMT.
Pivot Points
According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 1.1098. In case EUR/USD manages to breach the first resistance level at 1.1131, it will probably continue up to test 1.1150. In case the second key resistance is broken, the pair will probably attempt to advance to 1.1183.
If EUR/USD manages to breach the first key support at 1.1079, it will probably continue to slide and test 1.1046. With this second key support broken, the movement to the downside will probably continue to 1.1027.
The mid-Pivot levels for today are as follows: M1 – 1.1037, M2 – 1.1063, M3 – 1.1089, M4 – 1.1115, M5 – 1.1141, M6 – 1.1167.
In weekly terms, the central pivot point is at 1.1115. The three key resistance levels are as follows: R1 – 1.1276, R2 – 1.1442, R3 – 1.1603. The three key support levels are: S1 – 1.0949, S2 – 1.0788, S3 – 1.0622.
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