EUR/USD Extends Wednesday’s Advance as the Euro-Zone’s M3 Money Supply Advances in July; Price Action Remains Capped by 50-Day SMA

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EUR/USD: M3 money supply in the 16 member euro area advanced an annualized 0.2 percent in July after climbing 0.2 percent the previous month, while the three month average added a mere 0.1 percent, the European Central Bank in Frankfurt said today. Taking a look at the components of the report, the M1, the narrow measure of money supply slowed to 8.1 percent from 9.2 percent in June, while loans to the private sector rose 0.9 percent during the month. All in all, the three month average suggests that lending remains subdued in the bloc. Another gauge that illustrates rigid interbank euro lending is the 3 month Euribor rate, which remains near its yearly high despite the passage of the ECB stress tests last month. Banks are discouraged from lending to households as the European unemployment rate remains at its yearly high. Meanwhile, the 16 member euro area will likely face a slowdown in growth as governments implement tough austerity measures to battle their budget deficits, and at the same time, support ailing banks. In turn, I will keep my short position from 1.3100, while moving down my stop to 1.2900 in order to lock in some profits; target will remain unchanged at 1.2500 as price action as of late remains capped by the 50-day moving average. To discuss this and other reports, please visit the EUR/USD forum.

Written by Michael Wright, Currency Analyst

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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast