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Euro in New York: All Roads Lead Lower

Posted by Joseph Trevisani on Aug 19, 2014 5:11:00 PM

Thje euro opened at 1.3356 in New York after a 15 point range (1.3341-65) in Tokyo and London. The high came just after the value date change yesterday at 5:00 pm New York time. Asia coasted about 10 points lower but largely kept to a 5 point range 1.3355-60. London had a bit more volatility (1.3341-58), if one can call 17 points volatile, and a slight downward cast. Soft UK July inflation data (-0.3% vs -0.2%) at 4:30 am dropped the pound about 30 points in a minute and may have contributed to the weak euro performance. 

U.S. July CPI at 8:30 am was as expected (0.1% vs 0.1%, core 0.1% vs 0.2%, y/y 2.0% vs 2.0%, core y/y 1.9% vs 1.9%). The market may have been anticipating weaker CPI or housing starts as it popped from 1.3349 to 1.3357 in the twenty minutes before the twin 8:30 releases.

Direction reversed sharply at the Census Bureau July housing information which was well above market consensus (housing starts 15.7% vs 8.1%, building permits 8.1% vs 2.8%). The euro fell from 1.3357 to 1.3327 in three minutes with the prior 2014 low at 1.3333 (August 6th) offering no support and by 10:00 am had touched 1.3314.  Treasury yields rallied, the 10-year closed up 1 point at 2.40% and the dollar gained across the board.  

The initial collapse was followed by a brief spike to 1.3334 which was sold and set the pattern for each recovery with successively lower tops at 1.3328, 1.3325, 1.3323 and 1.3321. The ranges on these waves were less than 10 points. Just before the London close the euro hit 1.3313; for the remaining five hours of the U.S. session it went no higher than 1.3323.

Support is seen from a large barrier at 1.3300 as well as at the November 7th low at 1.3296.

Tomorrow we have German July PPI which is expected to confirm low European inflation (m/m expected 0.0%, y/y -.07%) and the minutes of the July 29-30 FOMC meeting. 

Euro closed at 1.3320.

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Chart: Bloomberg

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