Daily Economic Commentary: Euro zone

[PipDiddy]

Why, Bernanke, whyyyyy? Thanks to a lack of action from the Fed, high-yielding currencies like the euro took hits against its counterparts. EUR/USD fell by 82 pips, while EUR/JPY also slipped by 21 pips. How will the Fed’s decision affect expectations for Mario Draghi?

Super Mario will be on the hot seat today at a press conference at 12:30 pm GMT following the ECB’s interest rate decision at 11:45 am GMT. Since the Fed turned out to be a party pooper for the high-yielding currencies, it will be up to Mario Draghi to fulfill investors’ expectations for market intervention from a central bank.

Analysts say that Draghi will most likely announce a Spanish and Italian bond-buying program by combining the ECB and ESM’s powers, but there are also those who believe that the ECB head honcho will do nothing more than indicate his willingness to support the euro at all costs. So which side are you on?

While waiting for Draghi’s stage time, you might want to check out the Spanish employment numbers coming up at 7:00 am GMT and Spain’s 10-year bond auction scheduled sometime today. The mixed Spanish and Italian manufacturing PMI numbers barely influenced price action yesterday, but I have a feeling that traders will pay more attention to today’s data!

Be careful out there today, homies! Good luck and good trading!

[PipDiddy]

The euro saw another case of "loose lips, sink pips" in yesterday's trading as ECB President Mario Draghi's speech sent the currency trading lower against its major counterparts. EUR/USD spiked up ti 1.2404 only to drop back down and close the day 43 pips below its opening price.

Meanwhile, EUR/JPY finished the day with a 66-pip loss at 95.26.

The boldness that the ECB head honcho showcased in his speech last week got investors a tad too giddy and set their expectations high for the ECB rate decision. Many were anticipating the central bank to take on more aggressive actions, such as the re-activation of the SMP, after he promised to ensure the euro's survival.

However, yesterday Draghi only called for politicians to be on their toes to use the EFSF/ESM in the bond markets should the situation become unstable. Basically, his remarks implied that if Spanish and/or Italian bond yields soared to unsustainable levels again anytime soon, the central bank will not intervene. Yikes!

So what's next for the euro now that the much-awaited ECB rate decision is over?

Well, you should stay tuned to the NFP report from the U.S. as the high-caliber data would probably affect market sentiment. That will be released at 12:30 pm GMT.

However, if you don't think you're ready for the potentially strong volatility that could be brought about by the release, you can also trade the euro zone retail sales report due at 9:00 am GMT. Keep in mindt hat the forecast is for consumer spending to have grown by 0.1% in June.

[PipDiddy]

After days of disappointing data and unimpressive central bank interest rate decisions, the euro was given some relief as the week came to a close. The shared currency rallied strongly last Friday as the non-farm payrolls shattered market expectations. EUR/USD, which began the day at 1.2180, closed the U.S. trading session 201 pips higher 1.2381.

The much-anticipated non-farm payrolls from the U.S. came in at 163,000, much higher than the 101,000 initially anticipated. The better-than-expected figured tempered global slowdown concerns and supported risk appetite.

Today, we’ll see the Sentix Investor Confidence survey. It will publish at 8:30 am GMT and is predicted to print a reading of -30.8. Last month, the reading was at -29.6.

On Tuesday, await Germany’s Factory Orders report. It’s expected to show a decline of 0.8%, opposite the 0.6% gain seen the previous month. Wednesday has Germany’s Industrial Production report. It’s also slated to show a decline, but at a much lower pace at 0.7%.

Will we see the euro continue to dominate this week or was Friday’s move a one-time thing? It’ll all depend on whether the data this week upsets or satisfies the market.

[PipDiddy]

Consolidation is the name of the game as EUR/USD moved inside a 50-pip range, with support at 1.2350 and resistance at the 1.2400 handle, yesterday. EUR/JPY, on the other hand, crawled downwards and closed 25 pips down from its 97.20 open price.

Only the Sentix investor confidence index was released from the euro zone yesterday and the report came in slightly better than consensus. The reading fell for the fifth straight month in August as it slipped from -29.6 to -30.3, just a few points above the expected -30.8 reading.

There aren't any top-tier reports due from the euro zone today but we do have a few medium-tier releases that could still have an impact on euro pairs' price action. Italy is set to release its industrial production data at 8:00 am GMT and its preliminary GDP reading for the second quarter of 2012 at 9:00 am GMT. Then, at 10:00 am GMT, Germany will print its factory orders data which could show a 0.9% drop.

If you're planning to trade the euro today, make sure you keep an eye out for these releases because worse than expected figures could force the euro to head south while stronger than expected results could trigger euro buying. Stay on your toes!

[PipDiddy]

Bring out the smoothies boys and girls! Let's join EUR/USD as it simply chills on the charts! For the second straight day, due to the absence of high profile economic reports, EUR/USD lacked direction. It simply traded sideways and paced back and forth between support at 1.2375 and resistance at 1.2443.

The German Factory orders report yesterday failed to meet forecast. It came in significantly worse than expected as it showed a 1.7% decline. The market’s prediction was only a decrease of 0.9%.

We’ll probably see more directionless price action from EUR/USD today as no major reports are scheduled to come out. There are some tier 2 reports like the trade balances and German industrial production, but these reports normally have a muted impact on price action.

[PipDiddy]

Party’s over, fellas! The euro got the short end of the stick yesterday as the common currency pared back its gains across the board. EUR/USD fell by 39 pips, while EUR/GBP also suffered a 35-pip loss. What did Draghi do this time?

Don’t blame Draghi for this one! Germany was the party pooper yesterday when it released its less-than-stellar industrial production and exports data. Industrial production in the euro zone’s largest economy slid by 0.9% in June after rising by an upwardly revised rate of 1.7% in May. Even its exports showed weakness with only a 1.5% gain in June against May’s 4.2% uptick.

Of course, it also didn’t help that credit rating agency S&P lowered Greece’s credit rating outlook from stable to negative. And to think that its CCC rating is already eight levels below investment grade!

Eurogroup President Jean-Claude Juncker also contributed to the gloom when he suggested that a Greek exit is not desirable, but is still manageable. This is a divergence from the officials’ speeches only a couple of months ago denying the possibility of a Grexit.

The only reports scheduled for release today are the ECB’s monthly bulletin and Italy’s trade balance data. Watch the ECB report closely in case the officials feel like dropping another bomb on the forex markets!

[PipDiddy]

Down she goes again! For the second day in a row, the euro was dumped as traders continued to worry about the region's economy. While EUR/USD slipped 61 pips to 1.2298, EUR/JPY trickled down 30 pips to 96.66. Will the euro manage to pick itself up before the weekend?

The euro found no love yesterday as the ECB cut its growth forecasts for 2013 from 1.0% to just 0.6%. To make things worse, it also pointed out a few downside risks to the economy in its monthly bulletin. Hey, if the central bank itself thinks that the road ahead is about to get even rougher, then you know the region's in trouble, right?

It seems that investors are starting to lose hope that the ECB will act to support the euro zone. And even those that still have faith in the central bank aren't entirely sure if it CAN do anything at all.

Today, we only have a few minor reports from Germany and France on tap. Germany's expected to publish its final CPI report, forecasted to print a 0.4% uptick in prices again. Meanwhile, France has industrial production data on deck, and it's supposed to come in at 0.4%, up from -1.9%.

Now, I'll be honest with you, homies. These probably won't move the markets. That being the case, market sentiment will likely remain the key driver behind euro price action, which means the euro could come under selling pressure once more.

[PipDiddy]

And the losing streak continues! With the euro zone only printing minor reports, investors had time to worry about the ECB’s capability to intervene in the markets. It dragged EUR/USD to an intraday low of 1.2241, while EUR/JPY suffered a 44-pip loss.

Last Friday we saw Germany’s CPI data come in at its expected rate of 0.4%, while France’s industrial production data missed its 0.4% expectations with a 0.0% growth.

But no second-tier data distracted the euro bears! Word on the hood is that investors are starting to worry that the ECB would have a more difficult time buying Spanish and Italian government bonds since the ESM is yet to be approved by Germany’s High Court.

Will the euro zone officials pull up more card tricks to ease investors’ concerns, or will risk aversion continue to dominate the euro’s price action?

Only Germany’s wholesale price index at 6:00 am GMT is scheduled for release today, so you might want to pay extra attention to speeches by other euro zone officials or reports from other major economies for price-moving news.

Good luck trading today, folks! Don’t forget your pre-market preparations!

[PipDiddy]

Believe it or not, the euro gained ground against its major counterparts yesterday as EUR/USD closed at 1.2338 while EUR/JPY ended the day at 96.67. Did we see any positive developments from the euro zone that boosted the euro?

Not at all! Although Germany reported a slight uptick in its wholesale price index, this low-tier report doesn't really make a huge impact on the euro's movement. Since there were no other updates or reports released from the euro zone and since risk appetite wasn't exactly strong yesterday, the euro's rally could be attributed mostly to profit-taking.

With that, we might just be witnessing a temporary rally among the euro pairs and these gains might reverse pretty soon. Of course that depends on today's set of releases, a bunch of which will be coming from euro zone's largest economies.

Germany and France are set to release their GDP readings for Q2 2012, with Germany hoping to show a mere 0.2% expansion and France expected to print a 0.1% decline. Also due today are French CPI figures and preliminary non-farm payrolls, which are also expected to reflect a slowdown in inflation and hiring. The party starts at 5:30 am GMT, so make sure you're prepped by then!

Later on, at 9:00 am GMT, Germany will release its ZEW economic sentiment figure for August. The report could show a slight improvement in sentiment, from -19.6 to -19.4, as euro zone prospects seemed to improve lately. However, a weaker than expected result would reveal that investors and analysts are still very pessimistic about the euro zone debt situation, which could result in a euro selloff.

Don't forget that the U.S. is also set to print a bunch of top-tier data, namely its retail sales and PPI reports, during the U.S. session so check out my U.S. economic commentary if you plan to trade EUR/USD then!

[PipDiddy]

Hot start but poor finish by the euro yesterday, which couldn’t sustain the momentum it gained during the Tokyo session. After hitting as high as 1.2387, EUR/USD tumbled during the latter sessions and finished at 1.2325, down 12 pips from its opening price.

The euro got a small boost early, as both the German and French Q2 GDP readings came in better than expected. French and German GDP growth printed at 0.0% and 0.3% respectively, as opposed to the -0.1% decline and 0.2% projected increase.

However, the good times didn’t roll during the latter part of the London session as the German ZEW index and industrial production reports disappointed like a Ben Affleck acting performance. The German Zew economic sentiment report came in at -25.5 after it was projected to show an improvement at -19.4.

Meanwhile, industrial production dropped by -0.6%, which marks a stark drop from the previous month’s upwardly revised 0.9% increase.

Nothing on tap today, but make sure you keep an eye out for reports from other countries. Based on yesterday’s price action, it seems that fundies are driving the market this week. So read up and be informed so you don’t get blindsided today!