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Downward Pressure On EUR Crosses Extends

FOREX
  • In a similar theme to Monday’s trading session, Euro weakness has extended against all others in G10 on Tuesday with the most notable moves occurring against both the Chinese Yuan and the Australian dollar.
  • Euro weakness comes alongside the ECB bank lending survey as well as the soft German IFO release both working against the single currency. The ECB bank lending survey showed the fastest contraction on record for corporate loan demand, and also described the tightening impact on the Eurozone so far as 'substantial'.
  • Compounding the pressure on the EUR was the poorer-than-expected IFO release, with both current assessment and headline business climate releases dropping short of expectations. EUR/USD slipped to new pullback lows of 1.1021, extending the correction and moderating the previously overbought condition in the pair. The pair is now lower for the sixth consecutive session.
  • The expectations of fresh measures to support domestic demand in China are continuing to stoke broader optimism for risk sentiment across currency markets. Alongside the appreciating Chinese Yuan, the consequential impact on commodities is helping support currencies such as the AUD.
  • EURAUD has extended the week’s losses to around 1.6%, substantially narrowing the gap with the July lows of 1.6234 ahead of Australian CPI data due on Wednesday, the last major data point before the July FOMC decision and press conference.
  • It is also worth noting that today’s developments have worked against the short-term uptrend in EURGBP, with the break of both the 20-day and 50-day EMAs signalling a stronger reversal, opening 0.8564 initially ahead of 0.8504, the key support.
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