Technicals in FX

Technical Analysis

EUR/USD

EUR/USD seems to be range bound

“Euro-area domestic demand later this year and in 2014 should be supported by the accommodative monetary-policy stance as well as the recent gains in real income owing to generally lower inflation.”
- ECB President (based on Bloomberg)

• Pair’s Outlook
  For the past 6 days pair is trading in rather tight range—between monthly R1 and weekly PP. Although short and long term technicals indicate strength of the pair it does not seems there is a strong enough catalyst in the market which could ignite a rally. Bounce for weekly PP and some short term rally could be expected, but it is unlikely advance above 1.339, at least for the time being. Dips should find support with 1.318.
• Traders’ Sentiment
  It seems that bears are pushing bulls back out of the market since share of bears in the market increased by 2% and at the moment they account for 63% of market participants. In addition to this, share of pending long orders decreased by 4% and is at 54% gauge today.

GBP/USD

GBP/USD dips to 20-day SMA
"There is now no doubt that consumer confidence has recovered strongly from the unparalleled trough of the last five years. It is the longer-term changes that mean far more than one single month's figures, and the current trend is definitely upwards."
- GfK (based on Reuters)

• Pair’s Outlook
  Pair received a bearish impetus from the Fibo 61.8% (mid June to beginning of July move) few days ago. It depreciated by 50 pips (on the open to close basis) then and almost 100 pips yesterday until it found support with the 20-day SAM where the pair is trading at the moment. In any case, pairs outlook remains bearish as 1.5191/119 seems wont be able to provide enough of a support.
• Traders’ Sentiment
  Open positions are changing hands rather often between the bears and the bulls lately. Bears now account for 59% of market participants. That is 4% less than yesterday. Bulls, however, cant manage to swing the distribution of pending orders in their advantage—it remains at 48% gauge.

USD/JPY

USD/JPY trading at monthly PP
“From here, traders, like the Fed, will be looking to the data to suggest the timing of the next move.”
CMC Markets (based on MarketWatch)

• Pair’s Outlook
  After a 200 pip dip in the end of the last week, pair found support with monthly PP and has been trading around it for the past 4 days. It seems that such neutrality is likely to persist further, although, judging from market sentiment dynamics, we might see some short term rallies which should be capped by 99.6/100.00 JPY. In case pair receives bearish impetus and 97.5 JPY fails to provide enough of a support, there is a chance it might trail down to 94 JPY.
• Traders’ Sentiment
  Bulls are maintaining a tight grip on the market—they account for 74% or market participants. However, for the first time in almost two weeks majority, even if slim, of pending orders (52%) are set to sell the greenback against the yen.

USD/CHF

USD/CHF remains at Fibo 23.6%

"It's another waiting day, we have a lot of important data points later in the week so people aren't going to change positions a lot today."
- J. Safra Sarasin (based on The Economic Times)

• Pair’s Outlook
  Similarly to some other pairs greenback-franc cross is trading in a rather narrow range for the past 5 days. However, short and medium term technicals point at weakness of the pair. In such case it could be sold off all the way to 5 month low at 91.3 cents. Short term rallies are rather unlikely, but, just in case, should be capped by the 94 cents.
• Traders’ Sentiment
  Situation in the market is remaining exactly the same for the third day in a row. Share of open long positions in the market holds at 72% level and pending long orders remain at 57% gauge.

What now for USD Dollar pairs?

EURUSD

The Euro remains well supported, as the price continues to channel higher and approaches next target at 1.3300, with weekly close just under the barrier. Friday’s Doji would signal further consolidation, before the price resumes larger rally that commenced from 1.2754, 09/07 low and targets 1.3414, 18/19 / 06 peaks. Positive technical s remains supportive for final push higher, with 1.3250/00 zone offering initial support and expected to protect the downside.

Res: 1.3300; 1.3325; 1.3400; 1.3414
Sup: 1.3250; 1.3220; 1.3200; 1.3164




GBPUSD

Cable ended Friday’s trade with Doji candle, as the price moved within 1.5350/80 consolidative range. However, positive tone dominates on lower timeframes studies and favors further upside. Clear break above 1.5400 barrier that was cracked on spike to 1.5433, is required to open 1.5476, 26/06 high and psychological 1.5500 barrier. Positively aligned daily studies are supportive, with Friday’s low at 1.5354, reinforced by 20DMA, offering initial support, ahead of psychological 1.5300 handle. Only loss of last week lows at 1.5262, would delay bulls.

Res: 1.5402; 1.5433; 1.5476; 1.5489
Sup: 1.5350; 1.5327; 1.5300; 1.5262




USDJPY

The Dollar/yen ended week in red, after repeated failure to hold gains above psychological 100 level, triggered fresh weakness. Friday’s extension lower that broke below 98.22, previous low, probed below 98.00 support. This completed daily failure swing and opens way for broader weakness. Break below important supports at 97.65/58, 50% retracement of 93.78/101.52 ascend / daily Ichimoku cloud base, is required to confirm bearish resumption from 101.52 and 100.85 highs and open 97.00, round-figure support and 96.74, Fibonacci 61.8% retracement, as daily indicators are attempting below their midlines. Negative tone prevails on lower timeframes, with the downside being favored, however, bears may be interrupted by corrective rally on oversold conditions.

Res: 98.33; 98.70; 99.00; 99.38
Sup: 97.62; 97.22; 96.95; 96.74




AUDUSD

The pair ended week during which the pair tested both, 0.9000/0.9300 near-term range borders, with positive tone prevailing on a bounce towards the upper boundary. Friday’s trading was seen as consolidation under the range top, as the price held above 0.9200 support. Positively aligned short-term studies keep the upside focused, with clearance of 0.9316/43 barriers, required to confirm bottom and commence recovery phase. Conversely, repeated upside rejection would signal further sideways trading and increase downside risk, if price falls below 0.9200/0.9150, Fibonacci 38.2% / 50% of 0.8997/0.9316 range.

Res: 0.9286; 0.9316; 0.9343; 0.9400
Sup: 0.9226; 0.9200; 0.9167; 0.9127

Charts Trending?

USD/JPY

GOLD

EUR/USD

GBP/USD

FTSE 100

Gold Market Update

Bullion Round Up

Does the current breakout warrant higher prices or has the media overblown the potential for higher prices? We would like to take this opportunity to remind our readers that gold continue to trade in a bearish market environment as discussed this morning in the  Live Trading Room. The current rebound may well be a short one as we have not seen enough evidence that gold prices could recover and continue higher. Ironically, we are starting to share the same view as Chairman Bernanke that our understanding on gold could be rather limited.

Recent monotonous price movement has led many investors asking questions about the prospect of holding gold as safe haven assets. We have seen outflow from gold backed ETFs as the primary instigator on the fall in price. Physical demand from China, India and Middle East managed to support the recent price action. In addition, the GOFO rate on gold bullion has been trading in the negative zone for the past 10 day’s added pressure. Speculators have decided to cover their shorts at this level but further advancement in gold price may remain limited due to various resistance levels at $ 1338, $ 1350 and $ 1375.

We have covered the current temporary short covering event weeks before it happened. As a forward looking publication, we will not discount the fact that gold could maintain this bull run in the event that physical demand increases, confidence among investors are restored and more short covering among the sellers (as we approach end of July). Short term support is at previous resistance (now support) at $ 1301 level but other supports are at $ 1270, $ 1250 and $ 1208 area. With a weaker US dollar index, gold prices can maintain its current rebound. However, we will remain cautious on US economic data that could well increase the potential of “septapering” or even increase the size of tapering.

Gold Technical Outlook

The recent price action in gold reached our short term objective at $ 1325 / $ 1338 area. We continue to see strength in the current rebound and prices could consolidate in the next few days. However, we advise caution because investors and speculators may change stance should the US economic data improved.

Chairman Bernanke made it clear that tapering is data dependant and he promoted an accommodative stance for now. Global equities rally on the back of his dovish remark, followed by other risk assets. Given that gold reached an oversold territory (when it was trading at $ 1180), there are rooms for dip buyers and speculators to trade higher. Bloomberg survey shows that hedge funds are more bullish and have increased their long bet on gold.

Prices could continue higher after it break pass previous resistance at $ 1298 and the psychological level of $ 1300. Potentially, prices could retest $ 1325 and short covering rally may push the current rebound higher.

Despite that, the medium term bearish perception has not changed. Once the rebound rally is exhausted, we would strongly recommend our readers to short sell the yellow metal again.
Resistance: $ 1326, $ 1338, $ 1387 Support: $ 1302, $ 1270, $ 1208.
Traders Notes: Expect a short period of short covering before the market resume lower. Short sellers are looking to short at $ 1326 and $ 1338 area target remains open at the moment. Stop loss is advice at $ 1350 area.

Short Term (1 week)	Medium Term (1-3 weeks)	Long Term (1-3 months)
Bullish – target 1325/1338	Bearish – target 1155	A rebound rally?

USD/JPY ready for more weakness?

This Sunday Japan will vote a new Upper House, with the ruling party already having an overwhelming majority in the lower one. According to polls, Kuroda and Abe will get the all needed power to lead the country, something that will happen first time since 2007. Back then, the USD/JPY was trading above 120.00 levels never seen again. And in the meantime, both leaders reassure market players that they are ready to continue with their ultra lose policy of monetary easing.

Has the time come then, for USD/JPY to resume the upside?  So far nothing indicates so, according to the daily chart, although technical readings indeed favor the upside: latest June kneejerk down to 93.70 was barely corrective as the level represents the 38.2% retracement of the October/May bullish run. But the recovery stalled around a shorter Fibonacci retracement area, 78.6% retracement of its latest fall at 101.50, and the pair is having a hard time to hold above the 100.00 level these past couple of weeks.

Elections however, are those kind of events that can trigger a couple hundred rally in a day, and set a new outlook for a pair, and this weekend elections may be no exception: if current leaders get the overwhelming majority suggested by polls, the pair can easily breach the 101.50 resistance on Monday,  and once there, the way towards 103.70 yearly high, will be open. But steady gains above that 101.50 are a sine qua non condition to confirm the pair is ready to resume the upside.

On the other hand, summer in the north hemisphere keeps majors ranging, and boards with no actual volume: if 101.50 contains any attempt of advance further, the pair will continue hovering below 100.00, with a strong support around 98.20/80 price zone for the upcoming week.

View Live Chart for USD/JPY

FOMC Minutes release

The US dollar was not able to hold its previous gains and lost ground against its major counterparts over the past week. Following the FOMC meeting’s minutes release, it became clear that the Fed will continue its stimulus measures as Chairman Bernanke said the central bank has no intention to change its aggressive policy in the near future.

Forex markets were very quick to react on the news and just a few hours were needed for the dollar to plummet sharply against both the euro and the pound. At the end of the week, the EUR/USD traded at 1.3067, or having a 239 pips gain, while the GBP/USD added 204 pips to its value, closing at 1.5103 on Friday. The USD/JPY lost 186 pips, with the last quote for the week being at 99.34.

Indices
FOMC minutes and Bernanke’s subsequent statement were expected with great interest by the capital markets as well. After the central bank’s firm stance became evident, the major US indices took the upward movement, registering significant weekly gains. The S&P500 closed at the record 1,678 points, or 2.84% higher; the Dow increased its value by 2.14% to 15,452 points, while the Nasdaq100 rose by 3.81% to 3,075 points. Additional boost in investors’ optimism came from the better-than-expected financial results of JPMorgan Chase and Wells Fargo.

Meanwhile, European markets were trading mixed in the past week. Germany’s DAX30 and France’s CAC40 rose significantly by 4.61% and 1.99%, respectively, while Spain’s IBEX and Italy’s S&P/MIB reported falls within 1%.

Commodities

Bernanke’s speech also triggered action in gold and silver buyers. Gold (XAUUSD) added 5.09% to reach $1,284 per troy ounce, while silver (XAGUSD) rose to $19.91, or 5.57% per troy ounce.

What to expect this week?
This week’s start is mainly focussed on reports from the US and China, as the majority of economic events on Monday are coming from the two countries amid a closed Japanese market due to a holiday and a lack of data from the Eurozone countries. China has already published its GDP, with figures showing another slow growth for a second consecutive quarter.

The country’s economy increased by 7.5% YoY compared to 7.7% for the same period the previous year, while it also revealed slightly weaker-than-expected Q2 results at 1.7%, opposite forecasts for a 1.8% rise. One of the main reasons contributing to the country’s lower GDP growth lays in the declining world demand for Chinese goods. However, many analysts commented that the current GDP results in the case of China are not a negative signal and it is still a healthy pace of growth. Later in the session, the US is due to publish its Retail Sales for June, while New Zealand will publish its Consumer Price Index, both on quarterly and annual bases. Tuesday will see the release of a series of UK economic data, including the country’s Consumer and Retail Price Indexes, both for QoQ and YoY bases, and the Bank of England Inflation letter. Other highlights of the day will be the meeting’s minutes of the Reserve Bank of Australia and the Bank of Japan, the Consumer Price Index for both – the Eurozone and the US, along with Germany’s ZEW Survey on economic sentiment.

Wednesday’s focus will shift to the Bank of England meeting’s minutes and the country’s Claimant Count Change as well as the US Building Permits data for June. Thursday will produce the UK’s Retail Sales on quarterly and annual bases, along with the US Initial Jobless Claims. Friday’s main entries will come from Germany’s Import Prices for June and Canada’s Consumer Price Index, as the trading day will be rather quiet in terms of economic events.

Outside of the economic calendar, some leading US companies will publish their financial results and heat the market as the earnings season is gathering speed: Citigroup (C) on Monday, Coca-Cola (KO) and Johnson & Johnson (JNJ) on Tuesday, Bank of America (BAC), International Business Machines (IBM), American Express (AXP) and Intel (INTC) on Wednesday, Verizon Communications (VZ) on Thursday and General Electric on Friday.

The precious metals were the big winners last week

The precious metals were the big winners last week, but with some noticeable twists. The precious metals with industrial uses – palladium, silver, platinum – rose more than gold, as did WTI. This suggests the move had more to do with renewed optimism for the global economy than any increased confidence in QE. But then why did copper lag? Perhaps because it is simply less volatile (standard deviation of 6.4% so far this year, vs 16.0% for silver) or perhaps because of the continued slowdown in China (see below). Nonetheless given the overall drop in the dollar last week, gold’s performance can only be termed disappointing. It simply confirms to me that baring some unforeseen disaster, the trend for gold remains down.

The most important indicator for the day (and perhaps the week) is already out: China 2Q GDP. It hit the consensus forecast exactly at +7.5% yoy, down from +7.7% in Q1. That confirms the slowdown in the economy. But with the Finance Minister recently saying that growth of 6.5% or 7.0% wouldn’t be a problem, it may be somewhat of a relief, because even if it were worse, the government wouldn’t necessarily have done anything to boost growth. In addition, industrial production, fixed asset investment and retail sales for June were announced at the same time and they too were largely on target and confirmed the slowdown. Retail sales on the other hand accelerated, perhaps showing that the government is having some success in reshaping the economy to be more dependent on domestic demand. Nonetheless the business climate index and entrepreneur confidence index both fell, indicating that businessmen are getting nervous.

No doubt the recent spike in interbank rates and the difficulty in getting loans is having an impact on business sentiment. It seems likely that the slowdown in China will continue for some time, especially with the problems in the banking system. That suggests a weaker AUD and struggling base metal prices, in my view.

The other main event of the week will be Fed Chairman Bernanke’s testimony to the US House and Senate Banking Committees on Wednesday and Thursday, in which he will once again get an opportunity to send the markets into wild gyrations as he repeats himself for the umpteenth time. I don’t expect anything new from him; the only question is how the markets react to what he says. It appears from last week’s action that investors have finally gotten the message, which would imply little volatility, but one never knows. For today, there are no major Eurozone indicators out. Mr. Asmussen of the ECB will be speaking. Last week he sent EUR/USD to the low for the year with his comment that the ECB’s pledge to keep rates low for “an extended period of time” extends beyond 12 months. The ECB quickly backpedalled his comments in an email sent to journalists. He’s not likely to make that same mistake again and so I do not expect anything particularly revealing from him. The calendar in the US is thin but worth watching. The Empire State manufacturing index is forecast to have slipped a bit in July to 5.0 from 7.84 in June; retail sales on the other hand are forecast to have risen by 0.8% mom in June vs +0.6% in May. The retail sales “control group” (excluding autos dealers, building materials and petrol stations) is forecast to show the same +0.3% mom rise as it did the previous month. Continued growth in retail sales would probably be supportive of USD, given the US economy’s reliance on consumption.

The Market

EUR/USD

• EUR/USD remains unchanged since Friday with outlook remaining to the upside. Resistance levels can be found at 1.3200 and 1.3290, support at 1.3014 and 1.2890.

USD/JPY

• USD/JPY ended slightly higher. Outlook remains to the upside. Resistance levels can be found around the 99.80-100.00 region and 100.70, support at 98.60 and 97.00.

EUR/GBP

• EUR/GBP ended slightly higher. The outlook for the pair remains to the upside back up by a strong rising trend line support. Stochastic is in overbought region so a break of this trendline may see an imminent drop. Resistance is the 0.8690 level followed by 0.8790, support is at 0.8610 followed by 0.8590

Gold

• Gold continued its gaining streak after bouncing higher from its middle Bollinger Bands (4-Hour). Gold maintains strong momentum and we think it is highly likely that the 1300 level may be tested. A breakout of this level could see Gold soar much higher. However with the stochastic being in overbought region we may observe a down correction today if this level is not broken. Resistance levels can be found at 1300.00 with a breakout leading all the way to 1343, support at 1260.00 followed by 1226.50

Oil

• WTI moved higher after bouncing up from the 104.50 support, its middle Bollinger Bands. A further move to the upside may be expected as it maintains a strong rising trend line support. Resistance levels can be found at 107.40 with a breakout leading all the way to 108.30, support at 103.40 followed by 101.70

The greenback declined against most of its peers

The greenback declined against most of its peers.

Last night, after a very quiet European trading session, the dollar started to weaken strongly. The dollar index tumbled after Bernanke said the US economy still needs stimulus because the inflation and the unemployment rate are below target.

These words can affect the dollar in the longer term, so today we are going to have a very choppy day. What we see now is that the 20 days dollar strengthening period is over by now.
Technically the EURUSD could make a correction today and get back to test the 1.3000 level, but afterwards it could recover again, I bet on the bullish trend until end of this month.


The fallout from Bernanke’s dovish comments continue. Major levels are being breached with some pairs moving hundreds of pips.

EUR/USD is challenging 1.32, GBP/USD is close to 1.52 and USD/JPY is around 98.50 — updates coming

• EUR/USD is already over 300 pips higher since Bernanke opened his mouth: from around 1.2880 to 1.3192 at the time of writing. Resistance is at 1.32 followed by 1.3250. Support at 1.3160, followed by 1.31.
• GBP/USD is over 250 pips since the comments were made. It traded in the mid 1.49s, and it is now just under 1.52. This line, 1.52, serves as resistance. Support is at 1.5144.
• AUD/USD was temporarily blocked by a double top, but it broke above it and is trading at 0.9264. The next significant level is 0.9344. Support is at 0.9233.
• USD/JPY is trading at 98.60, after falling even lower beforehand. The pair was trading over 100.40 earlier in the day. Moves here are quite violent. The really big support line is at 95.
• USD/CAD dropped as low as 1.0375. It traded above 1.05 beforehand. Support is at 1.0360, followed by 1.03.
•  
  EUR: The ECB monthly report is usually not that interesting, but could be more of an event risk today should the ECB offer more detail on its decision to offer ‘forward guidance’ at this month’s meeting.
  Idea of the Day
  There was a notable turn around in the dollar overnight, thanks to comments from Fed Chairman Bernanke as well as the minutes to the June FOMC meeting.
  The minutes were highlighting the conditionality of the Fed stepping back from bond purchases and the need for more signs of improvement of the labour market.
  Meanwhile, the Fed Chairman stated that “Highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy”. The reaction seen on the dollar reflects the extent of dollar long positions in the market, with stops triggered across the board in response to the two-pronged attack.
  On the majors, it was the euro and Swissie that gained the most vs. the dollar.  For today, it’s a question of whether the market is capable of picking itself off the floor and building a long dollar base once again.
  
  Latest FX News
  
  AUD: Mixed messages from the jobs data, with headline employment rising by a greater than expected 10.3k, whilst the unemployment rate increased from 5.6% to 5.7%. Full-time employment fell, whilst part-time increased.  Aussie propelled to a two week high vs. the dollar, largely owing to dollar weakness from Bernanke and FOMC minutes.
  
  JPY:  No new policy measures after the latest Bank of Japan meeting. As was anticipated yesterday, the ‘recovery’ word was mentioned for the first time since early 2011, although growth forecasts were cut a little.
  
  GBP: Cable propelled back above the 1.50 level by the broad dollar weakness seen overnight.

FX Market Update, short term

EURUSD 

The Euro fell further on Friday and ended week just above strong support at 1.2795, 17/05 low, losing 1.78% for the week. Negative tone keeps the price pressured for full retracement of 1.2795/1.3414 upleg, as the price broke below bull-trendline, connecting 1.2744/1.2795 lows. Scope is seen for eventual push lower for test of 1.2744/50 double-bottom and completion of bull phase the commenced from these levels. Brief consolidation above Friday’s fresh low is triggered by oversold conditions, with any stronger rally, expected to find strong barrier at 1.2955, 50% retracement of 1.3102/1.2805 downleg / daily Ichimoku cloud base.

Res: 1.2870; 1.2920; 1.2955; 1.2989
Sup: 1.2805; 1.2795; 1.2750; 1.2700


GBPUSD 

Cable remains under increased pressure, with fresh weakness, seen last Friday, losing 23/29 / 05 double-bottom and psychological support at 1.5000 and accelerating losses below 1.4900 handle, to post fresh 4-month low at 1.4856. After completing 1.5000/1.5751 upleg, the pair is looking for test of another important support at 1.4830, 12/03 low / near 61.8% retracement of longer-term 1.3501/1.7041 ascend, to fully reverse larger bull phase. With bears dominating on larger and lower timeframes studies, further weakness is seen favored, with bears to be interrupted by limited corrective rallies on oversold short-term conditions. Former lower platform and 50% retracement of 1.5303/1.4856 downleg at 1.5080, offers solid resistance and is expected to cap.

Res: 1.4915; 1.4960; 1.5000; 1.5026
Sup: 1.4856; 1.4830; 1.4800; 1.4780


USDJPY

The pair rallied strongly on Friday, with acceleration higher started from higher base at 100.00 and completed 100.84/99.25 corrective phase. Break and weekly close above 101.00 barrier, suggests further appreciation, with initial targets standing at 101.79, 30/05 high and psychological 102.00 barrier. Extension above the latter is expected to open May’s lower platform at 102.50. Prevailing positive tone on short-term studies, supports the notion, with corrective pullback on overbought conditions, expected to precede fresh rallies. Good support lies at 100.40 zone, 50% of 99.25/101.52 upleg / 05/07 high and is seen as ideal reversal point.

Res: 101.52; 101.79; 102.00; 102.56
Sup: 100.84; 100.65; 100.40; 100.00


AUDUSD 

The Aussie dollar came under pressure and ended the week in red, after recovery rally stalled at 0.9179 and fresh bearish acceleration left a double-top. Quick reversal nearly fully retraced 0.9035/0.9179, short-term corrective phase. Bears look for break below 0.9035, 03/07 low that guards psychological 0.9000 support and 0.8959, Fibonacci 100% expansion of the downwave that commenced from 1.0581. Bearish 20/55 DMA’s crossover at 0.9115, maintains bears, while only rally above 0.9179 barrier would delay bears.

Eur/Usd is it ready?

EUR/USD fell for a second week in a row as the euro surrendered to a strengthening dollar and speculation that the ECB might act. Will Draghi send the euro even lower? Manufacturing and services PMI’s, Inflation data, and the ECB’s rate decision are the highlights of this week. Here is an outlook on the main events ahead and an updated technical analysis for EUR/USD.
Draghi reiterated ,in a speech in Paris, that the ECB’s monetary policy would remain accommodative and that the bank is ready to act in order to bail out the European economy from its long lasting recession. The measures include facilitating excessive labor market regulations which led to an increase in youth unemployment. In the US, the downgrade of growth figures for Q1 and the effort of Fed officials to downplay tapering expectations did little to curb the dollar’s strength. As long as the economy keeps growing, tapering plans remain in place and this is certainly dollar supportive.

Updates:

• Manufacturing PMIs from Spain, Italy and the Eurozone all showed improvement and beat their estimates.
• Italian Monthly Unemployment Rate edged higher, from 12.1% to 12.2%.
• Eurozone CPI Flash Estimate gained 1.6%, matching the forecast.
• Eurozone Unemployment Rate improved, dropping to 12.1% from 12.3%.
• Spanish Unemployment Change dropped sharply by 127.2 thousand, well below the forecast of -83.5 thousand. However, this could be a seasonal drop.
• Eurozone PPI declined 0.3%, missing the estimate of -0.2%.
• Euro Services PMIs will be released on Wednesday.
• EUR/USD is losing ground as the pairs tests the 1.30 line.
• EUR/USD makes a convincing fall below 1.30 on the crisis in Portugal: the government in Portugal is very unstable after a streak of resignations. The bailout program is in danger at bad timing for the continent.
• EUR/USD managed to recover and climb above 1.2960. Better than expected job gains in the US didn’t stop the recovery. It trades at around 1.2980. 1.30 provides resistance.

EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

1. Manufacturing PMIs: Monday.  The Manufacturing sectors in Spain, Italy and the Euro-zone moved closer to stabilization in May, although the readings were still below the 50 point line, indicating contraction. Spanish manufacturing activity shrank at a slower pace, reaching 48.1 in May from 44.7 in April. New orders edged up to 49.5 from 43 in April, however domestic demand remained sluggish. Italian Manufacturing PMI increased to 47.3 in May from 45.50 in April, beating market forecast of a 46.20 reading. The Euro-zone Manufacturing Purchasing Managers’ Index also edged up to 48.3 from April’s 46.7, higher than the 47.8 estimated. Overall, contraction in the EU area slowed down considerably in May giving hope for a modest recovery in the coming months. Spanish manufacturing sector is expected to climb to 48.9, Italy to 47.3 and the Euro-zone is expected to reach 48.7.
2. Italian Monthly Unemployment Rate: Monday, 8:00. Italian unemployment remained above 10% for the 15^th month in April, reaching 12%, worse than the 11.6 estimated by analysts. Italy’s new prime minister Enrico Letta, promised lawmakers that employment will be the “top priority” of his government.  Another increase to 12.1% is expected now.
3.  CPI Flash Estimate: Monday, 9:00. The annual inflation in the Euro-zone increased from 1.2 % to 1.4 % in May, in line with Eurostat’s flash estimate released two weeks earlier. For the 27-member European Union, which includes the euro-zone, annual inflation is at 1.6%, while month-to-month prices increased 0.1%.  A rise to 1.6% is anticipated.
4. Unemployment Rate: Monday, 9:00. Almost one in four is out of work in the 17 member states comprising the Eurozone. Unemployment rose to 12.2% in April, following 12.1% in March. Many blame the harsh austerity measures imposed by the ECB. Economists forecast further worsening before any improvement in the labor market. A further increase to 12.3% is expected this time.
5.  Spanish Unemployment Change: Tuesday, 7:00. Spanish unemployment is on a recovery path following May’s fantastic drop in the number of unemployed down of 98,265 from April. Hiring was stronger due to the coming summer holiday season. Another improvement is expected with a reduction of 83,500 unemployed.
6. PPI : Tuesday, 9:00.  Euro zone producer prices continued to decline in April contracting 0.6% after a 0.2% drop in the previous month. The fall was worse than expected. In a yearly base, PPI showed a 0.2% fall in April, after a 0.6% gain in the previous month. A smaller drop of 0.2% is expected.
7. Services PMIs: Wednesday. Mixed readings were released in May about the service sectors in Spain, Italy and the Euro-zone. Spain’s services sector increased to 47.3 from 44.4 in April, the slowest contraction since mid-2011, indicating Spain may finally step out of recession on its way to recovery. However Italy’s service sector continued to decline in May at a faster pace than in April falling to 46.5 from 47.0 in in the previous month and the Euro area service sector contracted to 47.2 from 47.5 in April, lower than the 47.5 estimated. Spain is expected to improve to 47.8, Italy to 47.1 and the Euro-Zone to 48.6.
8. Retail Sales: Wednesday, 9:00. Retail sales in the 17 countries that use the euro fell more-than-expected in April, declining for the third consecutive month, dropping 0.5% after a 0.2% fall in March. The decline was worse than the 0.2% drop projected by analysts. On a yearly base, retail sales dropped 1.1% in April from a year earlier, below expectations for a 0.8% decline, after falling 2.2% in March. A gain of 0.4% is anticipated.
9. Final GDP: Thursday, 9:00. The euro zone’s economic contraction slowed in the first three months of 2013, falling 0.2% after a 0.6% contraction in the last quarter of 2012. The reading was in line with market predictions. Overall, the Euro-zone remains weak despite encouraging signs suggesting recession halts in the Euro-zone. Consumers are still weak with limited purchasing power making recovery even harder. This will likely be confirmed now.
10. Rate decision: Thursday, 11:45, press conference at 12:30. The ECB isn’t expected to announce any change in policy in the upcoming meeting. In the previous one, it seemed that Draghi put the idea of a negative deposit rate on the backburner. However, the situation in the financial markets has dramatically changed since then: bond yields have risen and could bring the debt crisis back to the limelight. In the past, Draghi zigzagged between different moods between various meetings. After a positive and confident appearance last month, he could warn about the rising bond yields, growth prospects and falling inflation, given an impression that negative rates are more relevant once again and that the OMT is ready to be used soon. A worried Draghi could send the euro lower, while another confident appearance could help it.
11. German Factory Orders: Friday, 10:00. German factory orders plunged in April down 2.3% offsetting last month’s gain indicating Germany continues to struggle with recession in the Euro-zone. Economists expected a 1% drop. Nevertheless, German business confidence increased in May for the first time since February, indicating Germany is expected to grow in the coming months. Factory orders are expected to advance by 1.3% this time.