Yesterday we said that “it is not so bad in the eurozone” and in the US “it is much better”, however, it turned out not to be true. According to the data published yesterday, the situation is “very bad” and in the US it is “slightly better”. Services PMI in the eurozone in May in the final estimate was 47.2 vs. 47.5. Retail Sales in April fell 0.5% vs. forecast for a 0.2% drop and figures from March were revised downwardly from -0.1% to -0.2%. According to ADP report US private sector employment rose by 135,000 jobs in May vs. expectations for 170,000 and figures from April were revised downwardly by 6,000. US Factory orders in April was 1.0% vs. forecast for 1.6%. As the result, S&P 500 fell 1.37%, however, waiting for today’s ECB decision the euro rose 10 points.
Today at 14:00 GMT+4 data on German Factory Orders in April is issued, forecast -1.0% vs. 2.2% in March. At 15:45 GMT+4 ECB Interest Rate Announcement is scheduled. At 16:30 GMT+4 ECB Press-Conference.
The question is whether the ECB slashes the interest rate or not. Last month the key rate was cut 0.25% and there is nothing except for the capital outflow. We do not suppose that in the situation without crisis the ECB will cut the rate as it was not long ago. However, there is deposit rate, now it is 0.0% and the ECB wanted to cut it below 0, but it reduced the key rate. The main reason to slash the deposit rate is to stimulate banks to give credits, but in practice it will contribute to capital outflow. In fact, as Mario Draghi assumed six months go, is alone in a face of crisis and it is not supported by the government. The best alternative for the eurozone’s economy is to leave it as it is. We suppose it will take a month for the ECB to estimate the situation and Mario Draghi’s speech will be presented in aggressive negative mood. It is likely the decision about a new program will be announced.
Technically, we expect the euro will drop to the support of trend line on the H4 1.3028. If the level is broken, the second target 1.2995, approximate level of highs of May 22 and 24, opens. If the rate consolidates under 1.2995, in the short term we expect the test of bearish red channel in the range 1.2920/29.
The material has been provided by InstaForex Company – www.instaforex.com
Yesterday we said that “it is not so bad in the eurozone” and in the US “it is much better”, however, it turned out not to be true. According to the data published yesterday, the situation is “very bad” and in the US it is “slightly better”. Services PMI in the eurozone in May in the final estimate was 47.2 vs. 47.5. Retail Sales in April fell 0.5% vs. forecast for a 0.2% drop and figures from March were revised downwardly from -0.1% to -0.2%. According to ADP report US private sector employment rose by 135,000 jobs in May vs. expectations for 170,000 and figures from April were revised downwardly by 6,000. US Factory orders in April was 1.0% vs. forecast for 1.6%. As the result, S&P 500 fell 1.37%, however, waiting for today’s ECB decision the euro rose 10 points.
Today at 14:00 GMT+4 data on German Factory Orders in April is issued, forecast -1.0% vs. 2.2% in March. At 15:45 GMT+4 ECB Interest Rate Announcement is scheduled. At 16:30 GMT+4 ECB Press-Conference.
The question is whether the ECB slashes the interest rate or not. Last month the key rate was cut 0.25% and there is nothing except for the capital outflow. We do not suppose that in the situation without crisis the ECB will cut the rate as it was not long ago. However, there is deposit rate, now it is 0.0% and the ECB wanted to cut it below 0, but it reduced the key rate. The main reason to slash the deposit rate is to stimulate banks to give credits, but in practice it will contribute to capital outflow. In fact, as Mario Draghi assumed six months go, is alone in a face of crisis and it is not supported by the government. The best alternative for the eurozone’s economy is to leave it as it is. We suppose it will take a month for the ECB to estimate the situation and Mario Draghi’s speech will be presented in aggressive negative mood. It is likely the decision about a new program will be announced.
Technically, we expect the euro will drop to the support of trend line on the H4 1.3028. If the level is broken, the second target 1.2995, approximate level of highs of May 22 and 24, opens. If the rate consolidates under 1.2995, in the short term we expect the test of bearish red channel in the range 1.2920/29.
The material has been provided by InstaForex Company – www.instaforex.com
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