China's Lack of Stimulus Dampens EUR/USD Rally: Weekly Eurozone PMIs and ECB Speakers Awaited

EUR: China misfire sees EUR/USD rally slow

EUR/USD failed to build on gains last Friday. That may be a function of today's Juneteenth US public holiday, but also because China failed to announce any new stimulus measures over the weekend. Here, investors seem a little disappointed that Friday's State Council meeting in China did not result in any fresh stimulus - hence the spike in USD/CNH back to 7.15 today. Chartists will be looking for this USD/CNH rally to stall at 7.15/16 - failure to do so could keep the dollar a little better bid and weigh on EUR/USD.

 

This week, the eurozone focus will be on whether the flash eurozone PMIs released on Friday show any signs of life. We will also hear from several ECB speakers this week - including the influential Isabel Schnabel at 1340CET today. Let's see what she has to say about the chances of rate hikes in both July and September. 

 

If EUR/USD is to maintain last week's bullish momentum, short-term support levels at 1.0910/30 should hold. We continue to favour a near-term move to 1.1000/30 and probably higher as investors position for the second half dollar decline. Additionally, 25bp rate hikes in the UK, Norway and Switzerland should keep the European currency complex gently bid.