Euro Under Broad Based Pressure as Selling Spreads

Euro is under broad-based pressure today as selloff against Swiss Franc spreads to other pairs. Yen is currently the best performer following another round of pull back in Germany, and to a lesser extent US, benchmark yields. Aussie and Kiwi are also recovering while Dollar is firm. But for the week, Swiss Franc is still the winner followed by Dollar. Euro is the biggest loser so far, followed by Kiwi.

Technically, as Euro’s decline is gathering momentum, first focus will be on 1.0339/58 support zone in EUR/USD. Firm break there will confirm long term down trend resumption. Similarly, break of 1.3383 support in EUR/CAD will confirm down trend resumption for 61.8% projection of 1.4633 to 1.3383 from 1.3713 at 1.2941. Additionally, break of 141.39 minor support in EUR/JPY and 1.5083 minor support in EUR/AUD will also add more pressure to Euro.

In Europe, at the time of writing, FTSE is down -1.91%. DAX is down -2.27%. CAC is down -2.30%. Germany 10-year yield is down -0.1332 at 1.391. Earlier in Asia, Nikkei dropped -1.54%. Hong Kong HSI dropped -0.62%. China Shanghai SSE rose 1.10%. Singapore Strait Times dropped -1.04%. Japan 10-year JGB yield dropped -0.0016 to 0.231.

US PCE price index unchanged at 6.3% yoy, core PCE slowed to 4.7% yoy

US personal income rose 0.5% mom, or USD 113.4B, in May, matched expectations. Personal spending rose 0.2% mom, or USD 32.7B.

For the month, PCE price index rose 0.6% mom while core PCE price index rose 0.3% mom. For the 12-month period, PCE price index was unchanged at 6.3% yoy while core PCE price index slowed from 4.9% yoy to 4.7% yoy. Energy prices rose 35.8% yoy while food prices rose 11.0% yoy.

US initial jobless claims dropped to 231k

US initial jobless claims dropped -2k to 231k in the week ending June 25, above expectation of 229k. Four-week moving average of initial claims rose 7.25k to 232k.

Continuing claims dropped -3k to 1328k in the week ending June 18. Four-week moving average of continuing claims rose 5.5k to 1320k.

Canada GDP grew 0.3% mom in Apr, but to contract -0.2% in May

Canada GDP grew 0.3% mom in April, matched expectations. Both goods-producing (+0.9%) and services-producing (+0.1%) industries were up, as 13 of 20 industrial sectors expanded.

However, advanced information suggests that real GDP contracted -0.2% mom in May, with output down in mining, quarrying and oil and gas extraction, manufacturing and construction sectors.

Eurozone unemployment rate dropped to 6.6% in May, EU unchanged at 6.1%

Eurozone unemployment rate dropped from 6.7% to 6.6% in May, better than expectation of 6.8%. EU unemployment rate was unchanged at 6.1%. Eurostat estimates that 13.066m men and women in the EU, of whom 11.004m in the Eurozone , were unemployed in May

France consumer spending rose 0.7% mom in May, almost exclusively on manufactured goods

France consumer spending rose 0.7% mom in May, slightly above expectation of 0.6% mom. That’s the first increase after five months of contraction. The increase was almost exclusively due to the clear rebound in consumption of manufactured goods (+2.7% after -1.3% in April). Food consumption was stable (+0.1% after -1.2%) while energy consumption decreased significantly (-2.6% after +1.9%).

From Germany, retail sales rose 0.6% mom in May, below expectation of 0.8% mom. Import price index rose 0.9% mom, below expectation of 1.6% mom. Unemployment rate rose from 5.0% to 5.3% in June.

Swiss KOF economic barometer dropped to 96.9 in Jun, subdued outlook in upcoming months

Swiss KOF Economic Barometer dropped from 97.7 to 96.9 in June, slightly above expectation of 96.8. It’s now below long-term average for the second month in a row. KOF said, “the outlook for the Swiss economy in the upcoming months therefore remains subdued.”

KOF added: “The downward movement of the barometer is primarily driven by bundles of indicators for foreign demand and manufacturing. Only indicators for the financial and insurance services sector and for the construction sector are at a nearly constant level. However, indicator bundles for private consumption show a slight positive trend.”

Real retail sales dropped -1.6% mom in May, below expectation of 3.8% mom rise.

Japan industrial production dropped -7.2% mom in may, worst in two years

Japan industrial production dropped -7.2% mom in May, much worse than expectation of -0.3% mom. That was also the worst contraction in two years, since the -10.5% mom decline in May 2020.

The index of production at factories and mines stood at 88.3 against the 2015 base of 100. Index of industrial shipments dropped -4.3% mom to 89.0. Inventories dropped -0.1% mom to 98.5.

Nevertheless, manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to rebound 12.0% in June, followed by a 2.5% expansion in July.

China PMI manufacturing rose to 50.2 in Jun, non-manufacturing up to 54.7

China official PMI Manufacturing rose from 49.6 to 50.2 in June., above expectation of 49.6. Sub-index for production rose to 52.8, highest since March 2021. PMI Non-Manufacturing rose from 47.8 to 54.7, above expectation of 52.5. That’s also the highest level in 13 months.

“Even though the manufacturing sector continued to recover this month, 49.3 percent of the companies reported orders were insufficient,” said Zhu Hong, senior statistician at NBS. “Soft market demand is still the main problem facing the manufacturing industry.”

New Zealand ANZ business confidence dropped to -62.6, supply-side issues remain firms’ biggest problems

New Zealand ANZ Business Confidence dropped from -55.6 to -62.6 in June. Own activity outlook dropped from -4.7 to -9.1. Investment intentions dropped from 8.6 to -3.2. Employment intentions dropped form 6.1 to 0.7. Cost expectations eased from 95.5. to 93.5. Pricing intentions rose from 71.0 to 73.7. Inflation expectations eased from 6.18 to 6.02.

ANZ said: ” For now, supply-side issues remain firms’ biggest problems: finding skilled labour, costs, and wages being the top three. The RBNZ needs those problems to ease, and weakening demand to move up the charts. That’s what’s required to bring inflation pressure down.

“Of course, weaker demand might ease the overtime, but it’s unlikely to enhance profitability. That moment of happy equilibrium between demand and supply may prove fleeting, with the RBNZ entirely willing to incur the risk of a hard landing to ensure the long-term structural health of the economy in terms of well-anchored inflation expectations.”

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.0406; (P) 1.0471 (R1) 1.0506; More

EUR/USD is still staying above 1.0339/58 support zone with today’s decline. Intraday bias stays neutral first. Further fall is in favor with 1.0614 minor resistance intact. On the downside, sustained break of 1.0339/48 will resume larger down trend. Next target is long term projection level at 1.0090. On the upside, above 1.0614 will turn bias back to the upside for 1.0786 resistance instead.

In the bigger picture, focus stays on 1.0339 long term support (2017 low). Decisive break there will resume whole down trend from 1.6039 (2008 high). Next target is 61.8% projection of 1.3993 to 1.0339 from 1.2348 at 1.0090. However, firm break of 1.0805 support turned resistance will delay this bearish case, and bring stronger rebound first.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:50 JPY Industrial Production M/M May P -7.20% -0.30% -1.50%
01:00 NZD ANZ Business Confidence Jun -62.6 -55.6
01:30 AUD Private Sector Credit M/M May 0.80% 0.60% 0.80% 0.90%
01:30 CNY Manufacturing PMI Jun 50.2 49.6 49.6
01:30 CNY Non-Manufacturing PMI Jun 54.7 52.5 47.8
05:00 JPY Housing Starts Y/Y May -4.30% 3.00% 2.20%
06:00 EUR Germany Retail Sales M/M May 0.60% 0.80% -5.40%
06:00 EUR Germany Import Price Index M/M May 0.90% 1.60% 1.80%
06:00 GBP GDP Q/Q Q1 F 0.80% 0.80% 0.80%
06:00 GBP Current Account (GBP) Q1 -51.7B -39.7B -7.3B
06:30 CHF Real Retail Sales Y/Y May -1.60% 3.80% -6.00% -5.50%
06:45 EUR France Consumer Spending M/M May 0.70% 0.60% -0.40% -0.70%
07:00 CHF KOF Leading Indicator Jun 96.9 96.8 96.8 97.7
07:55 EUR Germany Unemployment Change Jun 133K -6K -4K
07:55 EUR Germany Unemployment Rate Jun 5.30% 5.00% 5.00%
08:00 EUR Italy Unemployment Rate May 8.10% 8.50% 8.40%
09:00 EUR Eurozone Unemployment Rate May 6.60% 6.80% 6.80% 6.70%
12:30 CAD GDP M/M Apr 0.30% 0.30% 0.70%
12:30 USD Initial Jobless Claims (Jun 24) 231K 229K 229K 233K
12:30 USD Personal Income M/M May 0.50% 0.50% 0.40% 0.50%
12:30 USD Personal Spending May 0.20% 0.50% 0.90% 0.60%
12:30 USD PCE Price Index M/M May 0.60% 0.20%
12:30 USD PCE Price Index Y/Y May 6.30% 6.30%
12:30 USD Core PCE Price Index M/M May 0.30% 0.40% 0.30%
12:30 USD Core PCE Price Index Y/Y May 4.70% 4.70% 4.90%
13:45 USD Chicago PMI Jun 55 60.3

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