Euro Analysis 01-07-2020

The single currency fluctuated the euro in a narrow range slanting back down during the Asian session against the US dollar on the cusp of developments and economic data expected today by the economies of the euro area and the US economy, the largest economy in the world, which includes the disclosure of the minutes of the Federal Committee for the Open Market and in the wake of the testimony of the Governor Federal Reserve Jerome Powell in front of Congress.

At 05:33 am GMT, the euro against the US dollar fell 0.12% to 1.1221 levels, compared to the opening levels at 1.1234 after the pair achieved its lowest level during the trading session at 1.1216, while it achieved the highest at 1.1241.

The markets are looking to the largest euro zone economies, Germany, to reveal the retail sales index reading, which may reflect a 3.5% increase compared to a 5.3% decline in last April, while the annual reading of the same indicator may show a decrease in the decline to 3.5% against 6.5%, before For Spain, the region's fourth largest economy, to see the Manufacturing PMI reading, which may reflect a contraction in contraction to 45.2 compared to 38.3 last May.

This comes before we witness about Italy, the third largest economy in the euro area, the disclosure of the manufacturing PMI reading, which may explain the contraction shrinking to 47.9 compared to 45.4 in May, and before the final reading of the industrial purchasing managers ’index for France, the second largest economy in the region, which may reflect The expansion stabilized at 52.1 versus a contraction at 40.6 in May.

Up to the final reading of the Manufacturing PMI for Germany and the economies of the eurozone as a whole, which may explain the stability of the contraction at 44.6 in Germany and 36.6 in May, and also the stability of the contraction at 46.9 in the region as a whole and compared to 39.4, and this comes in conjunction with the release of the reading of the unemployment change index for Germany Which may reflect a rise of about 120 thousand compared to a rise of 238 thousand in May.

On the other hand, investors are currently watching by the US economy to disclose preliminary data for the labor market with the release of the index of change in private sector jobs, which may reflect about 2,850 thousand added jobs compared to the loss of 2,760 thousand jobs in May, and this comes hours before the disclosure After tomorrow, Friday, the monthly report for jobs except agricultural and unemployment rates in addition to the hourly rate for the month of June.

This comes before we witness the disclosure of the final reading of the manufacturing PMI by Markit for the United States, which may reflect the stability of the contraction at a value of 49.6, little changed from the initial reading for the past month and against a contraction at 39.8 in May, before we witness the release of The construction spending index, which shows a 1.0% increase compared to a 2.9% decline in April.

Up to the disclosure by the largest industrial country in the world of the reading of the Institute of Industrial Supply index, which may show contraction shrinkage to 49.5 compared to 43.1 in May, as the reading of the Institute of Industrial Supply measured in prices may indicate shrinkage of deflation to 43.8 compared to 40.8 , And we would like to point out, because the reading reading at a value of 50 or higher reflects an amplitude, while its reading under 50 indicates a contraction.

This comes before the Federal Reserve revealed the minutes of the Federal Open Market Committee meeting that took place on 9-10 June, through which it decided to fix interest on federal funds at zero levels between zero and 0.25%, which came in line with expectations at the time. And, with the disclosure also at the time of the expectations of the members of the Committee of the rates of growth, inflation and unemployment in addition to the future interest rates for the next three years.

We would like to point out, because the expectations of the members of the Federal Committee included at that time that short-term benchmark interest rates will remain at their zero levels until 2022 and that the American economy may shrink 6.5% during 2020 and that unemployment rates may reach 9.3% by the end of this year 2020, before It declined to 6.5% in 2021 and to 5.5% in 2022.

In another context, yesterday we followed the testimony of the Federal Reserve Governor Powell and the US Treasury Secretary Stephen Manuchin before the House Financial Services Committee, through which Powell stated that controlling the Corona virus is vital to the recovery of his country's economy and that a new stimulus is being adopted during July. He added that the Federal Committee intends to provide more information about the lending program and extend it by the end of this week.

This was with Powell touched on Tuesday that the Federal Reserve has concerns about China's commitment to the partial trade agreement reached by Washington with Beijing earlier this year, while expressing that it may abide by it, explaining that the United States lost its confidence in China because of the lack of transparency about the Corona virus, and came This is with Treasury Secretary Manuchin also emphasizing before Congress to work to expand stimulus during July.

It is noteworthy that the US Congress has allocated $ 3 trillion so far as financial stimulus that included direct financial distributions for families and plans to exempt from small business loans, while the Federal Reserve has implemented cash stimulus programs exceeding $ 1 trillion to support the credit market for families and companies, the last of which was the launch of the Federal Reserve last week for a program that provides a package Loans worth $ 600 billion for businesses that employ around 15,000 people or whose returns exceed $ 5 billion.

Technical analysis

The euro versus the dollar fluctuates in a sideways path, sandwiched between the support 1.1175 and the resistance 1.1270, and the price needs to overcome one of these levels to clearly define its next targets.

Therefore, the sideways slope will be likely until we get a clearer signal for the next direction, noting that breaking the mentioned support will pressure the price to make more bearish correction and achieving negative targets that start at 1.1100 then 1.1020, while breaching the resistance will lead the price to resume the main bullish trend that targets areas 1.1420 tentatively.

The expected trading range for today is between 1.1140 support and 1.1340 resistance

Expected trend for today: sideways