Regional growth concerns got traders selling the euro today!
Can the common currency recover enough to regain its bullish momentum?
Before moving on, ICYMI, yesterday’s watchlist checked out GBP/CHF for a break-and-retest opportunity ahead of BOE’s policy decision. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. initial weekly jobless claims for the week ending June 17: 264K vs. 271K previous week
U.S. Existing Home Sales for May: +0.2% m/m to 4.3M unites(-0.5% m/m forecast; -3.2% m/m previous)
Fed’s Powell: FOMC members “do think that there are more rate hikes coming but we want to make them at a pace that allows us to see incoming information.”
In her remarks at a community event, Fed Board of Governors member Michelle Bowman said that “additional policy rate increases will be necessary to bring inflation down to our target over time.”
EIA crude inventories surprisingly fell by 3.8 million barrels vs. a 300K increase expected in the week of June 16
Australia’s manufacturing PMI rose from 48.4 to a three-month high of 48.6 in June as production shrank at its slowest pace since February
Australia’s services PMI fell from 52.1 to 50.7 even as businesses continued to hire additional staff in June
U.K.’s GfK consumer confidence rose for a fifth month in a row, up from -27 to -24 in June despite stubbornly high inflation and interest rates
Japan’s national core CPI, which excludes volatile fresh food prices, came in at 3.2% y/y in May, higher than the expected 3.1% y/y but slower than April’s 3.4% y/y reading
au Jibun Bank flash Japan manufacturing PMI dropped from 50.6 to a contractionary 49.8 in June as both output and new orders declined while new orders dropped at their steepest pace since February
U.K. retail sales slowed down from 0.5% m/m to 0.3% m/m in May (vs. -0.2% m/m expected) thanks in part to warm weather boosted non-store retail activity
HCOB France Manufacturing PMI dipped from 45.7 to a 37-month low of 45.5 in June; Services PMI also weakened from 52.5 in May to a 28-month low of 48.0 in June
Deteriorating demand conditions dragged HCOB Germany Manufacturing PMI from 43.2 to 41.0 (37-month low) in June while the Services PMI dropped from 57.2 to a 3-month low of 54.1
HCOB Eurozone Manufacturing PMI slipped from 44.8 to a 37-month low of 43.6 in June, Services PMI also hit a five-month low from 55.1 to 52.4.
S&P Global U.K. Manufacturing PMI dropped from 47.1 to a six-month low of 46.2, while the Services PMI also weakened from 52.8 to a three-month low of 52.8
Price Action News
Overlay of AUD Pairs 15-min
Much like in the previous Asian sessions this week, traders worried about major central banks going back to aggressive interest rate hikes that push bond yields higher and also raised the odds of recessions.
The risk-on AUD (and its comdoll twin NZD) weakened across the board earlier today. It didn’t help that PMI reports from both Australia and Japan fanned the investors’ global growth concerns.
The Aussie steadied along its intraday lows near the start of European session trading, which gave traders time to price in weaker Eurozone PMIs by selling EUR.
Upcoming Potential Catalysts on the Forex Economic Calendar:
U.S. manufacturing and services PMIs at 1:45 pm GMT
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EUR/JPY: 15-min
EUR/JPY 15-minute Forex Chart by TV
Weaker-than-expected Eurozone PMIs got traders selling the euro today!
EUR/JPY, which was trading around the 156.60 minor psychological level, dropped all the way to the 155.25 area before the sellers took a chill pill.
What makes the drop more interesting is that it stopped at an area of interest from earlier this week.Not only that, but EUR/JPY’s current levels are also not too far from a 61.8% Fib retracement, the S2 (155.11) of today’s Pivot Points, and a trend line support that hasn’t been broken in at least a week.
Are we looking at a trend continuation in the making?
It might depend on how EUR/JPY reacts to its trend line retest.
If EUR bears decide that one big 15-min bearish candlestick isn’t enough to price in weaker PMI growths in the Eurozone, then EUR/JPY could drop further, maybe to the 154.50 area.
But if we see an end-of-week profit taking, or if traders shrug off weak Eurozone PMIs in favor of pricing in the ECB’s hawkishness, then EUR/JPY could bounce from its support zone and go back above the trend line.
What do you think?