EUR/USD sank yesterday after the European Central Bank disappointed markets by not backing up its vows to defend the euro with immediate action. ECB President Mario Draghi indicated that any intervention would not come before September and only if governments activated the European Stability Mechanism (ESM) to join the ECB in buying bonds. He had set the bar very high last week by declaring that the bank would do whatever it takes within its mandate to preserve the euro. The European Central Bank left interest rates unchanged at 0.75%.
Today forex investors will shift attention to Non-Farm Employment Change and ISM Non-Manufacturing PMI figures on the last trading day of the week. Yesterday’s price action showed that higher prices are being rejected by traders. EUR/USD failed to close above the 1.2330 resistance level third time in a row. The key levels to watch will be the 1.2235 and 1.2140 levels. Beyond 1.2235 there will be more resistance at 1.2260 and 1.2300. If the bulls can’t push the pair above 1.2235, EUR/USD may accelerate its descending. A break below 1.2140 would indicate that the pair is heading to the previous (July) low of 1.2041. On its way down, expect to see interim support at 1.2110 and 1.2073.
The Asian stock markets opened lower today as ECB President Mario Draghi indicated it may resume buying government bonds to drive down surging Spanish and Italian borrowing costs, but passed the baton back to euro zone governments by saying they must act first. NIKKEI started the day at 8,539.71, previous close was 8,653.18. HANG SENG opened at 19,553.80, previous close was 19,690.20. Analyst at Samsung Securities, Lim Soo-gyun said “Draghi’s comments last week suggested at something much more urgent and many bubbles were popped by the bank’s rather lackluster response relative to sky-high expectations”.
The economic calendar is loaded today. EU Final Services PMI data will be released at 09:00 GMT. UK Service PMI will be released at 09:30 GMT. EU Retail Sales report will be released at 10:00 GMT. Non-Farm Employment Change figures will be released at 13:30 GMT. ISM Non-Manufacturing PMI will be released at 15:00 GMT.