EUR

The market had a limited reaction to worse than expected retail sales coming in at 0.1%; 0.3% survey and 0.0% prior reading.

As the euro trades on session highs against the USD, Eurozone final services PMI was 55.9; slightly better than the survey and prior showing of 55.6.

The ECB’s Nout Wellink, President of the De Nederlandsche bank, made the following comments:

• Talk of a double dip recession is irritation and irrelevant.
• The real future challenge is unemployment .
• Fiscal and political context is much more difficult.
• Financial market fragility is a major risk to recovery.

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The market was unchanged after Eurozone PPI (m/m) and revised GDP (q/q) both came in as expected with PPI reading 0.2% and GDP reading 1.0%.

The euro gained some strength after final manufacturing PMI came in at 55.1; better than the forecast and prior reading of 55.0. On the back of this release, the EUR made a new session high of 1.2734 against the USD.

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EUR/USD tested support at 1.3133 and has been grinding higher for the past few hours. The pair is currently trading around the 50.0% fibo line (1.3156) on the move from the low on July 30th to the high on August 7th, with the 200 hour moving average coming in at the same level. If the upward momentum continues, the next topside target is the 38.2% retracement line at 1.3198. 

• Inflationary pressure is contained in the medium-term.
• Sees gradual economic recovery in the Euro region.
• Current interest rate level is “very low”.
• Current monetary policy is “very accommodative”.

Germany’s July Final CPI came in slightly better than expected. The market had a limited reaction to the release.

• Final CPI (m/m) - Survey: 0.2%   Actual: 0.3%   Prior: 0.2%
• WPI (m/m) - Survey: 0.3%   Actual: -0.3%   Prior: -0.2%

After trading nearly 100 pips lower so far this session, EUR/JPY is trading in the area of 112.68, where hourly support has been found several times in the past two weeks. If the downward trend continues, and the pair can close below 112.68, the first stop on this downward train is the 50.0% fibo (112.36) level on the move from the low on July 21st to the high on the 28th. A solid move may see the pair trade down to the 111.80 level. It will be interesting to see what happens when Europe opens in a little less than three hours.

The BOJ also released the following comments:

• Economy shows further signs of moderate recovery.
• Global financial developments are downside risk.
• Must watch EU’s fiscal condition, and global economy.
• To maintain very accommodative financial environment.
• Beating deflation is a critical challenge.

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