The EUR/USD rebounded sharply from intraday lows on Monday, as disappointing economic data and a deepening debt crisis in Greece kept the currency markets on edge.
The EUR/USD rebounded nearly 200 pips from an intraday low of 1.0955, reaching 1.1146 in the early New York session. The EUR/USD will likely remain capped below 1.1160 at the start of the week. Above that level, key resistances for the EUR/USD include 1.1200 and 1.1247. On the downside, support levels are likely found at 1.1090 and 1.1050.
The EUR/USD was under pressure after Greece and international creditors failed to reach a new debt agreement over the weekend, pushing Athens to the brink of insolvency. The European Central Bank (ECB) has refused to increase emergency funding to Greek banks, which will remain closed for the next six days to avoid any further run on bank accounts. Greeks have withdrawn billions from their personal accounts amid growing fears their country will default on its massive €240 billion loan by the end of the month.
The Greek government announced over the weekend it will hold a public referendum on the troika’s latest bailout plan, which includes a five-month extension of the current bailout agreement set to expire on Tuesday. The referendum will be held on July 7.
In economic data, German inflation weakened more than expected in June, a sign the ECB’s quantitative easing program has a long way to go before achieving its desired effect.
Germany’s consumer price index (CPI) of goods and services rose just 0.3% annually in June, following a 0.7 percent annual increase the previous month, the Federal Statistics Office reported on Monday. A median estimate of economists called for a gain of 0.5%.
In EU-harmonized terms, Germany’s CPI rate increased just 0.1% annually, down from 0.7% the previous month. Economists forecast EU-harmonized inflation to reach 0.4% annually.
Eurozone confidence indicators mostly backtracked in June, with the economic sentiment indicator easing to 103.5 from 103.8. The business climate index fell to 0.14 from 0.28, while the industrial confidence indicator dropped to -3.4 from -3.0. Service sentiment edged up slightly to 7.9 from 7.8, while the consumer confidence indicator was unchanged at -5.6 in June.
In US data, pending home sales surged to a nine-year high in May, adding further evidence of a rebounding housing market. The pending home sales index, courtesy of the National Association of Realtors, rose 0.9 percent to 112.6 in May, its highest level since April 2006. It was also the fifth consecutive month pending home sales had increased.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.