Euro wavers as ECB meeting looms
FXstreet.com (Córdoba) - As US markets return from the long weekend, the focus is predominantly on the ECB policy announcement on Thursday where President Draghi is expected to unveil details of a bond-buying program aimed at capping peripheral yields.
The euro weakened against the greenback during the European session, as investors adjust positions ahead of the ECB meeting and weighed by soft PMI data and Moody's warning on euro zone debt rating.
Lots of bilateral meetings between euro zone leaders taking place and bringing nothing new, with investors still focus on Draghi's leaked comments which hinted at bond buying. ECB President said Monday that buying bonds with a maturity of up to 3-years could not be considered as state aid and would not breach the central bank mandate.
US stocks open September slightly off
Wall Street reopened after a long weekend, with indexes broadly lower as a report showed US manufacturing activity shrank at its fastest pace in more than three years in August, the third month of contraction in a row.
The ISM manufacturing index fell deeper into contraction, printing 49.6 in August against 49.8 in July and below expectations of a 50.0 reading.
Weak manufacturing data also weighed on the dollar as investors increase bets the Fed might need to embark in another round of quantitative easing to boost the sluggish economy.
In Europe stocks declined, with the Stoxx Europe 600 down 0.7%, weighed by data showing that the euro zone's manufacturing PMI remained in contraction for the 13th month in row in August, and as Moody's Investors Service warned that the European Union could lose its Aaa debt rating.
Peripheral yields down ahead of ECB meeting
However, Italian and Spanish yields slid on ECB Draghi comments. "We note however that Eurozone peripheral bond yields are lower, which suggests markets are still looking positively to the ECB announcement later this week", says the Wells Fargo analyst team.
"It seems unreasonable that Draghi or the ECB is prepared to announce a specific amount of short-term securities it is willing to purchase or what absolute or relative (to Germany) yields it will seek", says the BBH team. "Absent these details and in the absence of a formal request, we suspect some investors will be disappointed with the lack of resolution".
Euro finds support at 100-hour SMA
The shared currency fell to the 1.2555 area against the dollar before the 100-hour SMA offered support. It was last at the 1.2575 area, still down 0.1% on the day.
From a technical view, "Downside acceleration through 1.2600 and 1.2580 brings focus to key near-term support and breakpoint at 1.2560, break of which will confirm temporary top and allow for further retracement towards 1.2543, Fib 61.8, possibly psychological 1.2500 support", says Slobodan Drvenica, analyst at Windsor Brokers Ltd.
"Weakening hourly studies see the downside at increased risk. However, ability to hold above 1.2550/60, would still keep alive hopes of fresh attempt higher", the analyst added.
The euro weakened against the greenback during the European session, as investors adjust positions ahead of the ECB meeting and weighed by soft PMI data and Moody's warning on euro zone debt rating.
Lots of bilateral meetings between euro zone leaders taking place and bringing nothing new, with investors still focus on Draghi's leaked comments which hinted at bond buying. ECB President said Monday that buying bonds with a maturity of up to 3-years could not be considered as state aid and would not breach the central bank mandate.
US stocks open September slightly off
Wall Street reopened after a long weekend, with indexes broadly lower as a report showed US manufacturing activity shrank at its fastest pace in more than three years in August, the third month of contraction in a row.
The ISM manufacturing index fell deeper into contraction, printing 49.6 in August against 49.8 in July and below expectations of a 50.0 reading.
Weak manufacturing data also weighed on the dollar as investors increase bets the Fed might need to embark in another round of quantitative easing to boost the sluggish economy.
In Europe stocks declined, with the Stoxx Europe 600 down 0.7%, weighed by data showing that the euro zone's manufacturing PMI remained in contraction for the 13th month in row in August, and as Moody's Investors Service warned that the European Union could lose its Aaa debt rating.
Peripheral yields down ahead of ECB meeting
However, Italian and Spanish yields slid on ECB Draghi comments. "We note however that Eurozone peripheral bond yields are lower, which suggests markets are still looking positively to the ECB announcement later this week", says the Wells Fargo analyst team.
"It seems unreasonable that Draghi or the ECB is prepared to announce a specific amount of short-term securities it is willing to purchase or what absolute or relative (to Germany) yields it will seek", says the BBH team. "Absent these details and in the absence of a formal request, we suspect some investors will be disappointed with the lack of resolution".
Euro finds support at 100-hour SMA
The shared currency fell to the 1.2555 area against the dollar before the 100-hour SMA offered support. It was last at the 1.2575 area, still down 0.1% on the day.
From a technical view, "Downside acceleration through 1.2600 and 1.2580 brings focus to key near-term support and breakpoint at 1.2560, break of which will confirm temporary top and allow for further retracement towards 1.2543, Fib 61.8, possibly psychological 1.2500 support", says Slobodan Drvenica, analyst at Windsor Brokers Ltd.
"Weakening hourly studies see the downside at increased risk. However, ability to hold above 1.2550/60, would still keep alive hopes of fresh attempt higher", the analyst added.
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