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Market Analysis 20/11/2013: Market has more conviction on Fed than ECB
Daily Commentary 20.11.2013, Time of writing: 03:30 GMT
The big picture Market has more conviction on Fed than ECB
The dollar was mostly lower against the G10 currencies but higher vs EM currencies Wednesday. Comments by outgoing Fed Chairman Bernanke that rates will remain low long after the Fed has ended its monthly bond purchases, coupled with comments from Chicago Fed President Evans that the Fed should wait until next year, possibly March, before beginning to taper off the bond purchases, kept the dollar under pressure.
It’s noticeable though that the euro managed to firm despite some dovish comments from ECB officials. ECB Vice President Constancio said once again that the ECB has all instruments on the table, a theme reinforced by fellow board member Praet, who added that it could take four years to close the output gap in Europe. The euro was momentarily weakened by such comments but quickly bounced back, indicating perhaps that market participants think there is more disagreement on strategy on the ECB Council than there is with the Fed. The ECB members all seem to agree that they are discussing further measures and are technically ready to implement them, but there does not seem to be the same degree of commitment to act yet. Tomorrow’s preliminary Eurozone purchasing managers’ indices could either confirm or shift attitudes. The market is looking for a modest rise in both the manufacturing and services PMIs; further improvement could reinforce the idea that the ECB is in a “wait-and-see” mode, thereby boosting EUR/USD, while a surprise deterioration would push the possibility of further ECB action back into center stage.
The main exception was USD/JPY, which rose after Japan posted its biggest October trade deficit ever. The need to import oil is crushing Japan’s trade account and adding to the pressure for the Bank of Japan to support the economy. I expect the yen to weaken further.
The focus today will be on the release of the minutes from the recent Bank of England and FOMC meetings. Last month’s BoE minutes sent GBP/USD higher by around 15 pips immediately, but the pair turned around and was down around 40 pips from the peak in half an hour on the Bank’s view that lower rates were helping the economy. This time I expect the minutes to have less impact as they might not add much to what we know after the recent inflation report. The FOMC minutes are likely to be more informative but not necessarily more market-moving. The release of the September minutes sent EUR/USD down 25 pips right away but the pair recovered all the losses within an hour, and it’s arguable that the September minutes were more important as they explained the surprise decision not to taper off the Fed’s bond buying program. Today the market will be looking to see if there is any consensus on the FOMC about when to start tapering and whether to strengthen the Fed’s forward guidance.
The only important indicators are from the US, and the market consensus for them is largely USD-negative. Retail sales for October are expected to rise 0.1% mom, a turnaround from a contraction of the same pace in September. Excluding autos and gasoline, retail sales are estimated to be up 0.2% mom, a slowdown from +0.4% in September. The headline CPI for October is estimated to be unchanged mom vs a 0.2% mom rise in September, bringing the yoy rate of change down to 1.0% from 1.2%. Slowing inflation could also be negative for the dollar today. Finally, adding to the dollar’s woes, existing home sales for October are expected to have declined 2.7% mom, a faster rate of decrease than -1.9% mom in September. There are four main speakers today: BoE Chief economist Spencer Dale and MPC member Martin Weale, while in the US, the talkative New York Fed President Dudley speaks again, as does St. Louis Fed President Bullard. Dudley’s previous comments were mixed – his prepared comments were relatively confident on the economy but his view during the Q&A was more dovish, so the markets will be listening closely to him today for further clarification.
The Market EUR/USD
• EUR/USD moved higher, crossing above the 200-period moving average. The pair is currently heading towards the 1.3600 (R1) resistance barrier, where a decisive violation may trigger extensions towards the next obstacle at 1.3700 (R2). Both momentum studies follow their support lines, confirming the bullish attitude of the pair. The short-term trend remains an uptrend since the rate follows the light-blue support line and only a dip below it would be a reason to reconsider our analysis.
• Support: 1.3500 (S1), 1.3389 (S2), 1.3321 (S3)
• Resistance: 1.3600 (R1), 1.3700 (R2), 1.3782 (R3).
USD/JPY
• USD/JPY moved higher but failed to reach the previous high of 100.43 (R1). The price now is forming a lower peak and a break below the 99.55 (S1) support may signal the completion of a failure swing formation, targeting the next support at 99.08 (S2). Nonetheless, the uptrend remains in effect for now since the price lies within the purple channel and above both the moving averages. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.55 (S1), 99.08 (S2), 97.95 (S3).
• Resistance: 100.43 (R1), 101.44 (R2), 102.40 (R3).
GBP/USD
• GBP/USD moved sideways, remaining below the 1.6147 (R1) resistance level. If the longs manage to drive the rate above that level, they might target the next resistance at 1.6260 (R2). However, the RSI found resistance at its 70 level and moved lower and the MACD, although still in bullish territory, seems ready to cross below its signal line. Thus further consolidation before the advance resumes should not be ruled out.
• Support: 1.6000 (S1), 1.5890 (S2), 1.5772 (S3).
• Resistance: 1.6147 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold also moved in a consolidative manner, remaining above the 1269 (S1) support barrier and getting closer once again to the upper boundary of the downward sloping channel. A decisive dip below the 1269 (S1) level would have larger bearish implications, targeting the next obstacle at 1251 (S2). However, since a doji candle is identified on the daily chart, I remain neutral until a break of the aforementioned support or the upper boundary of the channel occurs.
• Support: 1269 (S1), 1251 (S2), 1221 (S3).
• Resistance: 1290 (R1), 1305 (R2), 1320 (R3).
Oil
• WTI moved higher, returning above the 93.14 (S1) level. The bears were not strong enough to maintain the price below that level and the continuation of the upward corrective wave may target the 95.36 (R1) resistance barrier and the upper boundary of the blue channel. The overall trend remains a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 21/11/2013
Daily Commentary21.11.2013, Time of writing: 03:30 GMT
The big picture The dollar rose against a basket of major currencies on Wednesday and in Asia on Thursday following the release of meeting minutes for the Federal Reserve, hinting stimulus tapering could come in a few months. Data released on Wednesday also supported the greenback. Retail sales expanded above expectations to 0.4% in October coming in flat the month earlier, fuelling optimism that the consumer-driven U.S. economy is on the mend. Business inventories inched up by 0.6% in September. There was weak data out of the housing sector and consumer price inflation figures met expectations. The euro weakened and plunged on Wednesday after reports said the European Central Bank is considering negative interest rates and talk of more European Central Bank policy easing. The common currency was sold heavily against the yen in particular. The big fall in euro/yen helped drive a broad bounce in the yen. Asian shares were mixed Thursday as the Bank of Japan unanimously kept its benchmark interest rate at 0.10% as expected. HSBC China flash manufacturing purchasing managers’ data for November came in weaker than expected. The commodity currencies were hit even harder than the euro. The Australian dollar fell more than 1 percent against the greenback on Wednesday. The Aussie came under pressure after Reserve Bank of Australia Assistant Governor said on Wednesday the bank would prefer the exchange rate to be lower.
Gold prices dropped on Wednesday after the Federal Reserve statement. In commodities trading, Brent crude oil rose on Wednesday after a U.S. official said it would be very difficult to get a nuclear agreement with Iran this week.
Today we have the preliminary manufacturing and service-sector PMIs for China, France, Germany and Eurozone as a whole for November. China got the ball rolling overnight with the figure falling to 50.4, missing estimates of 50.8. The manufacturing PMIs for Europe are estimated to improve and to be over 50, except France’s number which is estimated edge higher but remain below 50. Eurozone consumer confidence advance figure for November is expected to rise, but to remain below zero (-14.0 est. vs -14.5 prv.).
Later in the day, we have the US weekly jobless claims for Nov 16. The figure is estimated to be down to 335K from 339K the previous week. We also get the producer prices for October. The headline figure is expected to have fallen by 0.2%, at a faster pace than the decline of 0.1% in September, while the excluding-food-and-energy rate is forecast to come out at 0.1%, same as in the previous month. The Philadelphia Fed survey is forecast to fall to 15.0 in November from 19.8 in October.
As for the speakers: ECB president Mario Draghi speaks on “Strategies for more growth”. Chancellor Angela Merkel delivers the opening speech. ECB’s Weidmann speaks at a conference in Berlin. Feds Powell, Lacker and Bullard will also speak.
The Market EUR/USD
• EUR/USD fell sharply yesterday, breaking below the light-blue support line. The fall was halted by the 1.3414 (S1) support barrier, where a decisive dip may trigger extensions towards the next support level of 1.3321 (S2). Both momentum studies confirm the weakness of the pair, since the RSI broke below its blue support line and the MACD, already below its trigger, is ready to get a negative sign.
• Support: 1.3414 (S1), 1.3321 (S2), 1.3216 (S3)
• Resistance: 1.3500 (R1), 1.3578 (R2), 1.3662 (R3).
USD/JPY
• USD/JPY moved higher after finding support at the lower boundary of the purple upward sloping channel and reached the 100.43 (R1) resistance. A violation of that hurdle will confirm the continuation of the uptrend since the rate will overcome the previous high. The 50-period moving average lies above the 200-period moving average providing support to the price action, while the MACD is ready to cross above its signal line, favoring further advance. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 99.55 (S1), 99.08 (S2), 97.95 (S3).
• Resistance: 100.43 (R1), 101.44 (R2), 102.40 (R3)
GBP/USD
• GBP/USD moved lower after failing to break above the 1.6147 (R1) hurdle. However, as long as the rate remains above the 200-period moving average and the upper boundary of the purple channel, I consider the decline to be a pullback. If the bulls manage to maintain the price above the channel’s boundary, they might try to challenge once more the aforementioned resistance. An extension of the move back into the channel, will turn the bias to the downside.
• Support: 1.6052 (S1), 1.6000 (S2), 1.5890 (S3).
• Resistance: 1.6147 (R1), 1.6260 (R2), 1.6375 (R3).
Gold
• Gold moved lower, breaking below the 1269 and 1251 bariers (yesterday’s support levels). The precious metal remained within the purple downward sloping channel and is now heading towards new short-term lows. Both the RSI and the MACD oscillator confirm the bearish picture of the price. However, the RSI lies in its oversold area, thus further consolidation or an upward corrective wave should not be ruled out.
• Support: 1211(S1), 1177 (S2), 1155 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved sideways remaining slightly above the 93.14 (S1) level. The bears’ inability to overcome that hurdle is confirmed by both our momentum indicators, since they continue to follow their upward paths. Nonetheless, WTI remains in a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 22/11/2013
Daily Commentary 22.11.2013, Time of writing: 03:30 GMT
The big picture The dollar traded mixed against most major currencies. U.S. data was encouraging, a surprisingly strong weekly jobless claims report showing that filing new claims for jobless benefits fell sharply last week. The dollar was pressured lower after a soft regional factory gauge in Philadelphia. Euro bounced after Mario Draghi downplayed media reports that the central bank was actively considering cutting a key interest rate below zero. Germany's manufacturing purchasing managers' grew faster in November and helped offset disappointing outcomes elsewhere, particularly a tumble in French business activity. The yen fell to a fresh four-year low against the euro. There was little reason for investors not to continue using the yen as a funding currency for carry trades after the Bank of Japan stayed committed to its ultra-loose monetary policy on Thursday. The Australian dollar took a further slug after the country's central bank chief said he was open to the idea of intervention to push the currency lower.
In commodity markets, Brent crude oil jumped on Thursday to its highest in more than a month. Gold prices fell in Asia on Friday as investors expect that the Federal Reserve will move relatively soon to taper its USD85 billion bond-buying program.
The main item in Europe today is Germany’s Ifo survey for November. The business climate index is expected to rise to 107.7 from 107.4 in October. The current assessment index is forecast to be up to 111.5 from 111.3 and the expectations index also to advance to 104.0 from a previous reading of 103.6. Earlier in the day we get Germany’s final GDP for Q3. As usual the forecast is the same as the initial estimate. Italian retail sales for September are estimated to rise by 0.1% vs 0.0% the previous month. From Canada we have the releases of CPI and retail sales. The Canada’s core measure of CPI for October is forecast to rise by 0.2%, the same pace as in September. However this will bring the yoy rate down to 1.2% from 1.3%. Retail sales for September are forecast to have risen 0.3% on a mom, a faster pace than the previous +0.2% in August. On the other hand, the retail sales excluding auto are expected to show a slowdown (0.2% mom in September vs 0.4% in August). We have five ECB and two Fed speakers today. ECB Mario Draghi speaks at the European Banking Congress. ECB’s Noyer, Praet and Nowotny speak at SUERF conference in Paris, while ECB’s Weidmann speak at a panel discussion. Kansas Fed President Esther George speaks on banking supervision and Fed Governor Daniel Tarullo speaks on shadow banking.
The Market EUR/USD
• EUR/USD moved higher yesterday and during the early European morning is trading between the 1.3414 (S1) support level and the resistance of 1.3500 (R1). However, as long as the prior high holds the bias remains to the downside. If the bears regain their momentum and manage to drive the battle lower, breaking the 1.3414 (S1) barrier, I would expect extensions towards the next support at 1.3321 (S1). Both momentum studies lie near their neutral levels, not providing any indications for the next directional movement of the pair.
• Support: 1.3414 (S1), 1.3321 (S2), 1.3216 (S3)
• Resistance: 1.3500 (R1), 1.3578 (R2), 1.3662 (R3).
USD/JPY
• USD/JPY continued surging yesterday, violating the 100.43 barrier (yesterday’s resistance). At the time of writing the price is testing the 101.36 (R1) resistance level. An upward penetration may target the 102.40 (R2) hurdle. The short-term trend remains an uptrend, since the rate is printing higher highs and higher lows and the 50-period moving average lies above the 200-period moving average, providing support to the price action. Nonetheless, the RSI oscillator lies in its overbought territory, pointing downwards, thus we may experience a pullback before the bulls prevail again.
• Support: 100.43 (S1), 99.55 (S2), 99.08 (S3).
• Resistance: 101.36 (R1), 102.40 (R2), 103.50 (R3).
GBP/USD
• GBP/USD moved significantly higher after finding support at the 50-period moving average. The pair violated the 1.6147 level (yesterday’s resistance) and during the early morning, European time, is heading towards the ceiling of 1.6260 (R1). The rate is forming higher peaks and higher troughs within the short-term light-blue channel and lies above both moving averages, confirming its bullishness.
• Support: 1.6147 (S1), 1.6052 (S2), 1.6000 (S3).
• Resistance: 1.6260 (R1), 1.6375 (R2), 1.6442 (R3).
Gold
• Gold moved in a consolidative mode, remaining slightly below the 1251 (R1) resistance barrier. The precious metal is still trading within the downward sloping channel and I would expect extensions towards the next hurdle at 1211 (S1). However, the RSI remains near its 30 level, thus further consolidation or an upward corrective wave should not be ruled out.
• Support: 1211(S1), 1177 (S2), 1155 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved higher reaching the 95.36 (R1) resistance barrier. The upward move confirms the recent indications provided by both momentum studies which continue to follow their upward paths. Nonetheless, WTI remains in a downtrend as indicated by the blue downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average. Only an escape from the channel would be a reason to start assuming a change in the trend.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 25/11/2013
Daily Commentary25.11.2013, Time of writing: 03:30 GMT
The big picture Oil and Gold prices fell sharply on Monday after Iran and six world powers sealed a deal restraining its nuclear program. Opposition by Israel, and Arab nations limited the decline. Over the weekend ECB Executive Board members said that the central bank is ready to take further action if necessary. On Friday euro firmed against the dollar as Germany business confidence beat expectations. The yen strengthened following a deal between Western powers and Iran. The yen however still remains under pressure as investors use it for carry trades. Australian currency reached a three-month trough.
There is no major economic data due today. US pending home sales for October are estimated to rise by 1.1%, a turnaround from -5.6% in September. Nonetheless, the yoy rate is estimates at -1.0% from +1.1%. Dallas Fed Manufacturing activity for November is also to be released today and is expected to rise to 5.0 from 3.6.
As for the rest of the week, on Tuesday more housing data from US are coming out alongside with the US consumer confidence for November. We also have New Zealand’s trade balance for October and the minutes of the latest meeting of Bank of Japan. On Wednesday, Norway releases its Labor Force Survey unemployment rate for September and UK publishes its preliminary GDP figures for Q3. From US we have the durable goods orders for October, the final release of the University of Michigan consumer confidence for November and the Conference Board leading indicator for October. On Thursday, we have Germany’s unemployment rate and Germany’s preliminary CPI for November. Eurozone also releases its final data on consumer confidence for November. Finally, on Friday, we get Japan’s jobless rate and CPI data for October. We also get Norway’s unemployment rate for November, Eurozone’s CPI estimate for the same month and Eurozone’s unemployment rate for October. Canada also publishes data on its GDP and from UK we get the UK Nationwide house price index for November.
The Market EUR/USD
• EUR/USD moved higher on Friday, breaking once again above 1.3500. The pair is currently testing the prior light-blue uptrend line where an upward violation may have larger bullish implications. On the other hand, if the recent upward wave was just to give a test on the trend line, I expect the bears to drive the battle lower targeting areas below 1.3500. Our short-term studies provide mixed signals, since the RSI found resistance near its 70 level and moved lower, while the MACD crossed above both its trigger and its zero lines.
• Support: 1.3500 (S1), 1.3414 (S2), 1.3321 (S3)
• Resistance: 1.3578 (R1), 1.3662 (R2), 1.3782 (R3).
USD/JPY
• USD/JPY moved significantly higher, violating the 101.36 barrier (Friday’s resistance). I expect the pair to continue moving upwards, challenging the 102.40 (R1) resistance level. The short-term trend remains an uptrend, since the rate is printing higher highs and higher lows and the 50-period moving average lies above the 200-period moving average, providing support to the price action. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting a stronger pair in the next few weeks.
• Support: 101.36 (S1), 100.43 (S2), 99.55 (S3).
• Resistance: 102.40 (R1), 103.60 (R2), 105.25 (R3).
GBP/USD
• GBP/USD continued moving higher, remaining between the 1.6147 (S1) support and the ceiling of 1.6260 (R1). In my opinion, the longs may continue their momentum and reach the 1.6260 (R1) barrier. However, I expect the rate to find strong resistance at that level, and we might experience a downward wave after the test. The RSI remains near its 70 level, enhancing my suspicions for a pullback in the near future.
• Support: 1.6147 (S1), 1.6052 (S2), 1.6000 (S3).
• Resistance: 1.6260 (R1), 1.6375 (R2), 1.6442 (R3).
Gold
• Gold moved slightly lower, remaining below the 1251 (R1) resistance barrier. The trend of the precious metal is a downtrend as indicated by the downward sloping channel and by the fact that the price is trading below both moving averages. If the price continues to follow its downward path, I expect it to challenge the 1211 (S1) hurdle.
• Support: 1211(S1), 1177 (S2), 1155 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved lower after finding resistance at the 95.36 (R1) level and the upper boundary of the downward sloping channel. The price is now heading towards the strong support of 93.14 (S1), where a clear violation would trigger extensions towards the 91.22 (S2) barrier. The MACD, although in a positive territory, crossed below its trigger line, while the RSI poked its nose below its blue support line. The trend remains a downtrend as indicated by the downward sloping channel and by the fact that the 50-period moving average remains below the 200-period moving average.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 27/11/2013: USD higher vs commodity currencies
Daily Commentary 27.11.2013, Time of writing: 03:30 GMT
The big picture USD higher vs commodity currencies:
Another mixed day, with the dollar gaining strongly vs the commodity currencies but falling against EUR, GBP and CHF. USD/JPY was little changed.
In the US, building permits exceeded expectations as did the Richmond Fed manufacturing index, while house prices matched or exceeded market forecasts. On the other hand, consumer confidence was lower than expected, falling for the third consecutive month instead of rising as the market had anticipated. But even here, the signs were not all bad as employment conditions improved. Nonetheless US yields declined somewhat, Fed Funds rate expectations declined further and the dollar came off.
The weakness of the commodity currencies probably stems from comments by senior RBA officials who are concerned about the strength of AUD. RBA Deputy Gov. Lowe said he expects to see further adjustment in the currency, echoing recent comments by Gov. Stevens. CAD eased along with WTI (which fell after it was announced that inventories rose for the ninth consecutive week, rather than falling as expected). The sharp decline in NZD (down 0.75% vs USD in the last 24 hours, the worst performance of any of the G10 currencies) is probably due to the general decline in commodity prices overall. The only specific news out about the country was positive for the currency: the trade deficit in October was NZD 168mn, narrower than expected and indeed the narrowest for any October since the mid-1990s as exports to China hit a record. The explanation there probably is the general decline in commodity prices. In my view, the strong house price and jobs data from New Zealand means the pressure is still on RBNZ to raise rates and so the NZD should be stronger than AUD. This could be a buying opportunity.
The European session starts with France’s consumer confidence, which is estimated to remain unchanged at 85. Norway unemployment September is also expected to have remained unchanged at 3.5%. The second estimate of UK’s GDP for Q3 is expected to be the same as the initial estimate at +0.8% qoq. Later in the day, from US, we have the weekly jobless claims for Nov 23. Durable goods orders for October are also coming out. The headline figure is expected to fall by 2.0%, a turnaround from a revised +3.8% in September, but excluding transportation goods, orders are forecast to be +0.5% mom vs -0.2% mom September. The Chicago purchasing manager’s index for November is forecast fall to 60.0 from 65.9 in October. The University of Michigan final figure for consumer sentiment in November is expected at 73.1, up from an initial estimate of 72.0. A rise in core durable goods orders and upwards revision to consumer confidence could support USD. The Conference Board leading indicator is forecast to see no change in October vs an increase of 0.7% in September. Finally we have two speakers on Wednesday: ECB’s Asmussen and BoE’s Andrew Gracie.
The Market EUR/USD
• EUR/USD moved higher yesterday, breaking above the 1.3578 barrier (yesterday’s resistance). The pair managed to overcome the previous high and turned the bias to the upside again. If the longs continue their momentum I expect them to challenge the next resistance at 1.3662 (R1). In addition, the 50-period moving average seems ready to cross above the 200-period moving average. Such a cross would add significance to the uptrend.
• Support: 1.3578 (S1), 1.3500 (S2), 1.3414 (S3)
• Resistance: 1.3662 (R1), 1.3731 (R2), 1.3820 (R3).
USD/JPY
• USD/JPY found support near the 101.36 (S1) level and moved higher. I believe that the bulls will challenge once more the resistance of 101.90 (R1). An upward penetration of that hurdle would trigger extensions towards the 102.40 (R2) barrier which coincides with the 261.8% Fibonacci extension level of the 17th-25th Oct. downward wave. On the daily chart, the rate is trading above the upper boundary of a symmetrical triangle formation, suggesting further advance.
• Support: 101.36 (S1), 100.43 (S2), 99.55 (S3).
• Resistance: 101.90 (R1), 102.40 (R2), 103.60 (R3).
GBP/USD
• GBP/USD found support at the lower boundary of the short-term uptrend channel, which coincides with the 1.6147 (S1) support barrier, and moved higher. At the time of writing the pair is heading towards the 1.6260 (R1) ceiling, near the 161.8% Fibonacci extension level of the previous downward wave, where I expect the price to find strong resistance. The short term trend remains in effect for now, since the rate is trading within the channel and the 50-period moving average remains above the 200-period moving average.
• Support: 1.6147 (S1), 1.6052 (S2), 1.6000 (S3).
• Resistance: 1.6260 (R1), 1.6375 (R2), 1.6442 (R3).
Gold
• Gold moved lower after finding resistance at the upper boundary of the downward sloping channel and the resistance of 1251 (R1). As long as the yellow metal is trading within the channel, the short-term direction is still a downtrend. On the daily chart the price is trading slightly above the neckline of a possible head and shoulders top formation, where a downward break would have larger bearish implications.
• Support: 1227(S1), 1211 (S2), 1177 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved lower to test once more the 93.14 (S1) floor. It has ben trading between that barrier and the resistance of 95.36 (R1), since Nov. 5th. A violation of one of those levels could be the first signal for a new trend for WTI. At the moment, the price lies within the longer-term downward sloping channel, while the bearish cross of the moving averages remains in effect since the 23rd of September.
• Support: 93.14 (S1), 91.22 (S2), 89.32 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.00 (R3).
BENCHMARK CURRENCY RATES - DAILY GAINERS AND LOSERS
MARKETS SUMMARY
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Market Analysis 28/11/2013: The day of the data
Daily Commentary 28.11.2013, Time of writing: 03:30 GMT
The big picture The day of the data:
Yesterday’s market was easy to understand: currencies followed the data in logical fashion. Better-than-expected jobless claims, surprising strength in the Chicago PMI and an upward revision to the U of Michigan consumer confidence figure sent US interest rates higher, Fed Funds expectations up sharply, and pushed the dollar up vs most of its G10 counterparts (the main exception being GBP, which remained firm). The leading index was also higher than expected (albeit lower on the month) and MBA mortgage applications seem to be bottoming. The only major disappointment was in the durable goods orders for October: non-defense capital goods orders excluding aircraft, a barometer of companies’ investment intentions, was particularly disappointing – but that didn’t seem to bother the market, perhaps because the government shut-down in October would naturally make companies reluctant to invest at that time. The upward revision to the U of M consumer sentiment index suggests that sentiment was recovering by the latter half of November, so the market can afford to ignore some disappointing October data. As long as the US data continues to show a steady economy, thoughts of tapering will not be far from the market and USD should gain, especially at the expense of EM currencies.
There is talk in the market that the ECB may be considering a new long-term refinancing operation (LTRO) aimed at improving liquidity to companies. It would lend money to the banks on the condition that the money be lent to the private sector. That would help to reverse some of the contraction in the ECB’s balance sheet, which may be one factor pushing EUR/USD higher recently. However, ECB Vice President Constancio played down that idea, saying that lenders aren’t under the same pressure as when the ECB did the extraordinary round of 3-year LTROs in late 2011. He also tried to dampen speculation about negative rates, saying “we are not really near a decision on that” and that any such decision would be taken “only in quite extreme situations.” EUR/USD has tended to move lower as ECB Council members held out the possibility of such moves, but denials like this would tend to push it back up. We will get further clarification next Thursday, following the ECB meeting. That meeting will include the ECB’s new forecasts, which many analysts had expected to be the trigger for the rate cut that actually came at the November meeting. I would expect to hear further dovish comments from ECB President Draghi, but given the difference in views on the board, I don’t expect any further measures. The absence of any fresh initiatives is likely to push EUR/USD higher ahead of that meeting, in my view.
Today we have Germany’s unemployment rate and preliminary CPI, both for November. The unemployment rate is estimated to remain unchanged at 6.9%, while the preliminary CPI for November is expected to rise to 1.3% yoy from 1.2%. An outturn like that, showing less deflationary pressure in Europe’s largest economy, could be positive for the euro. On the other hand, Eurozone M3 growth is expected to continue decelerating to 1.7% yoy in October from 2.1% yoy, slowing the 3-month average to 2.0% from 2.2%. That would add to the deflationary pressures in the Eurozone and hence be EUR-negative. The bigger problem for the ECB is the divergence between the money supply, which is growing modestly, and bank lending and private sector credit creation overall, which are shrinking. Problems like this with the transmission mechanism explain why the ECB might want to look at more direct ways to encourage banks to lend rather than simply lowering rates. Finally, the forecast for Eurozone’s final consumer confidence for November remains the same as the initial estimate at -15.4.
The US will be closed for the Thanksgiving holiday. In Canada, Q3 current account deficit is estimated to be effectively unchanged at CAD 14.4bn vs CAD 14.6bn in Q2.
Besides the indicators, the Bank of England publishes its Financial Stability report and Gov. Carney will present it at a press conference. Finally, ECB’s Asmussen speaks for a third consecutive day.
Overnight, New Zealand’s building permits for October are forecast to be up 1.7% mom from 1.4% mom in September, showing continued strength in the housing sector. That may be NZD-positive as the RBNZ searches for ways to cool the housing market. From Japan, the jobless rate for October is expected to ease to 3.9% from 4.0%. National CPI is expected to rise 1.1% yoy in October, the same as in September, while the Tokyo CPI rate is expected to accelerate to 0.7% yoy from 0.6% yoy. Excluding food and energy, inflation is expected to be 0.2% yoy, up from 0% in September. This would be the first positive figure for core inflation since Oct. 2008. That could take some pressure off the BoJ to ease further and therefore be JPY-positive. Japan preliminary industrial production for October is estimated to rise 2.0% mom, accelerating from +1.3% in September. From UK we get the Gfk consumer confidence, which is expected to improve modestly to -10 in November from -11 in October.
The Market EUR/USD
• EUR/USD moved lower, but found support near the blue uptrend line and the 1.3578 (S1) barrier. If the bulls manage to maintain the price above that area, they may drive the battle higher, targeting the resistance of 1.3662 (R1). The 50-period moving average poked its nose above the 200-period moving average, adding significance to the short-term uptrend. On the daily chart the 14-days MACD oscillator lies above its trigger line and seems ready to get a positive sign.
• Support: 1.3578 (S1), 1.3500 (S2), 1.3414 (S3)
• Resistance: 1.3662 (R1), 1.3731 (R2), 1.3820 (R3).
EUR/JPY
• EUR/JPY continued moving higher, breaking above the 138.00 barrier (yesterday’s resistance) which coincides with the 161.8% Fibonacci extension level of the 30th Oct.-11th Nov. downward wave. The pair is now trading at highs last seen back in 2009. I expect the longs to challenge the resistance barrier of 139.57 (R1). The uptrend is confirmed by the blue trend line, and by the fact that the 50-period moving average lies above the 200-period moving average, providing support to the price action.
• Support: 138.00 (S1), 137.10 (S2), 135.91 (S3).
• Resistance: 139.57 (R1), 142.53 (R2), 146.82 (R3).
GBP/USD
• GBP/USD surged yesterday, violating the 1.6260 ceiling and the 161.8% Fibonacci extension level of the 7th -12th Nov. downward wave. After the break, the pair moved lower to give another test to that area before continuing its advance. I expect the advance to continue, targeting the 1.6375 (R1) hurdle. The short term uptrend remains in force, since the rate is trading within the channel and the 50-period moving average remains above the 200-period moving average.
• Support: 1.6260 (S1), 1.6147 (S2), 1.6052 (S3).
• Resistance: 1.6375 (R1), 1.6442 (R2), 1.6535 (R3).
Gold
• Gold found once again resistance at the 1251 (R1) resistance level and moved slightly lower. As long as the yellow metal is trading within the channel, the short-term direction is still downward. On the daily chart the price is trading slightly above the neckline of a possible head and shoulders top formation, where a downward break would have larger bearish implications.
• Support: 1227(S1), 1211 (S2), 1177 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved lower yesterday, breaking below the strong hurdle of 93.14. In early European trading the price is heading towards 91.20 (S1), where a clear downward penetration would target the next support at 87.85 (S2). WTI lies within the longer-term downward sloping channel, while the bearish cross of the moving averages remains in effect since the 23rd of September.
• Support: 91.20 (S1), 87.85 (S2), 84.00 (S3).
• Resistance: 93.14 (R1), 95.36 (R2), 98.81 (R3).
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Market Analysis 29/11/2013
Daily Commentary29.11.2013, Time of writing: 03:30 GMT
The big picture A thin market isn’t necessarily a quiet market:
A thin market doesn’t necessarily mean a quiet market – on the contrary, rates were unusually volatile yesterday in part because of the Thanksgiving holiday in the US. As a result, the dollar’s performance was unusually wide yesterday, ranging from +0.95% vs NZD to -0.50% vs SEK. It was higher against CAD, JPY and AUD as well but down vs EUR, CHF, GBP and NOK. The commodity currencies continue to weaken along with commodities themselves. NZD’s performance was particularly puzzling, as it came after New Zealand business confidence rose to a near 15-year high and the money markets have increased the odds of a January interest rate hike in NZ to around 40%. Apparently it is being dragged down by weakness in AUD. Similarly, the strong rally in SEK following the weaker-than-expected retail sales in October was surprising as well. That may have been in anticipation of a strong Q3 GDP figure today; the market is looking for +0.5% qoq, a turnaround from -0.2% qoq in Q2. GBP strengthened after the Bank of England surprised the markets by saying it would end mortgage incentives for banks under its Funding for Lending Scheme in order to slow rising UK house prices. This was perceived as a hawkish move – maybe one that presages further moves to rein in credit growth? My take would be different: the move suggests that the Bank won’t have to raise rates to quell any housing bubble and so it will allow them to keep rates lower for longer, which should be GBP-bearish. Note that NZD fell back on Aug. 20th when the RBNZ instituted restrictions on mortgage lending in an effort to cool the housing market there.
EUR/JPY and USD/JPY continue to move higher; the usual end-of-month deluge of data from Japan had no influence on the market even though core inflation (excluding food and energy) moved back above zero for the first time in five years, which might indicate that the Bank of Japan is beginning to have some success in creating inflation.
Speaking of UK house prices, the European morning started with the UK Nationwide house price index, which rose by the expected 0.6% mom in November, a slowdown from +1.0% in October. Later in the day, UK mortgage approvals for October are estimated at 68.5k, up from 66.7k.
The key indicator of the day is the preliminary Eurozone inflation data for November. It was the sudden fall in inflation last month that triggered the ECB’s surprise cut in interest rates at their November meeting. The market is expecting a small rebound in the headline CPI figure to +0.8% yoy from +0.7% yoy in October. The preliminary core rate is also forecast to slightly accelerate to 0.9% yoy from +0.8% yoy. After Thursday’s greater-than-expected acceleration in German inflation to +1.6% yoy from +1.2%, anything else would be a serious surprise. Higher Eurozone inflation will take some pressure off the ECB to cut rates and therefore is likely to support EUR/USD. The Eurozone’s unemployment rate is expected to have remained at 12.2% in October. Elsewhere in Europe, German retail sales for October unexpectedly fell 0.8% mom, whereas they had been expected to rise +0.5%. The news had no immediate impact on EUR/USD.
Canada publishes its GDP data for September. The mom release is estimated to show a rise of 0.2%, a deceleration from +0.3% in August. On the other hand, the yoy rate is expected to rise to 2.1% from 2.0%.
We have only one speaker today. ECB’s Mersch gives a keynote speech on Financial Market policy at a conference.
The Market EUR/USD
• EUR/USD moved higher, riding the short-term blue trend line. As trading starts in Europe the pair is heading towards the resistance of 1.3662 (R1). The trend remains an uptrend as indicated by the blue trend line and the bullish cross of the moving averages. On the daily chart the 14-days MACD oscillator lies above its trigger line and managed to enter is bullish territory, confirming the positive picture of the pair.
• Support: 1.3578 (S1), 1.3500 (S2), 1.3414 (S3)
• Resistance: 1.3662 (R1), 1.3731 (R2), 1.3820 (R3).
USD/JPY
• USD/JPY moved higher and reached the 261.8% Fibonacci extension level of the 17th-25th Oct. downward wave. The bias remains to the upside, since the rate is trading above the uptrend line and above both moving averages. However the RSI seems ready to exit its overbought zone, thus I would expect a pullback towards the 101.90 (S1) support barrier before the bulls prevail again. On the daily and weekly charts, the subsequent move upon the completion of the symmetrical triangle is still in progress.
• Support: 101.90 (S1), 101.12 (S2), 100.27 (S3).
• Resistance: 103.60 (R1), 105.24 (R2), 106.85 (R3).
EUR/GBP
• EUR/GBP moved lower yesterday reaching the 0.8316 (S1) support level. Currently the pair is testing that barrier and a clear downward violation would have larger bearish implications. If the break occurs I would expect extensions towards the 161.8% Fibonacci extension level of the 7th -13th Nov. upward wave. The short-term trend is a downtrend, since the price is printing lower highs and lower lows within the blue downward sloping channel and the 50-period moving average lies below the 200-period moving average.
• Support: 0.8316 (S1), 0.8263 (S2), 0.8221 (S3).
• Resistance: 0.8385 (R1), 0.8413 (R2), 0.8462 (R3).
Gold
• Gold moved slightly higher to test once more the upper boundary of the downward sloping channel. As long as the yellow metal is trading within the channel, the short-term direction is still downward. On the daily chart the price is trading slightly above the neckline of a possible head and shoulders top formation, where a downward break would have larger bearish implications.
• Support: 1227(S1), 1211 (S2), 1177 (S3).
• Resistance: 1251 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI remained at the levels we left it yesterday. However, since the bears managed to overcome the strong hurdle of 93.14 (R1) on Wednesday, I would expect them to regain momentum and drive the battle towards the support of 91.20 (S1). WTI lies within the longer-term downward sloping channel, while the bearish cross of the moving averages remains in effect since the 23rd of September.
• Support: 91.20 (S1), 87.85 (S2), 84.00 (S3).
• Resistance: 93.14 (R1), 95.36 (R2), 98.81 (R3).
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Market Analysis 02/12/2013
Daily Commentary02.12.2013, Time of writing: 03:30 GMT
The big pictureMonday is PMI day! We get the November manufacturing PMIs from Sweden, Norway, Switzerland, Italy, UK and the US. We also have the final manufacturing PMIs for the month for France, Germany and the Eurozone as a whole. The UK manufacturing PMI for November is expected to rise only slightly to 56.2 from 56.0, but even that should confirm the strength of the UK economy and thus support GBP. On the other hand, the US ISM manufacturing PMI for November is expected to fall to 55.0 from 56.4, owing to the government shut-down. The decline could pressure USD. The final Eurozone PMI will set the tone for Thursday's ECB meeting. The preliminary figures suggested that the Eurozone economy was nearly stagnating; any downward revision would revive thoughts of further ECB action to loosen policy and thus be EUR-negative.
Overnight, RBA decides on its cash rate target which is expected to remain unchanged at 2.50%. The focus will be on Gov. Steven's statement, particularly any comments about the strength of AUD. Australia’s current account deficit for Q3 is expected to have widened to AUD -11.5bn from AUD -9.4bn and retail sales for October to rise by 0.4%, a slowdown from +0.8% in September.
We have two speakers during the day. Federal Reserve Chairman Ben Bernanke will greet students at the National College Fed Challenge and ECB vice president Constancio will speak at a conference. Bernanke may give some clues about the Fed's intention to begin tapering off its monthly bond purchases.
As for the rest of the week, the focus will be on Thursday when we have the ECB, BoE and Norges Bank policy meetings. The market expects no change in rates from BoE or ECB, so the focus will be as usual on the press conference following the ECB meeting and the ECB’s new economic forecasts. Norges Bank may revise down its future rate path, which could hurt NOK. On Tuesday, UK releases its construction PMI for November. On Wednesday, Australia publishes data on its GDP for Q3. In Europe we have service sector PMIs from Italy, France, Germany, Eurozone as a whole and UK. Eurozone also releases its preliminary GDP for Q3 and its retail sales for October. From US, we get the ADP employment report for November, Trade balance for October and the ISM non-manufacturing PMI for November. There’s also a Bank of Canada meeting; the market expects no change there either. On Thursday, besides BoE’s and ECB’s decisions, we have Australia’s trade balance for October and the second estimate of US Q3 GDP. Finally, on Friday, the market’s attention will be on US non-farm payrolls and unemployment rate for November. The market is looking for NFP to rise by 183k, which would probably be enough to encourage speculation that Fed tapering could begin as soon as this month's FOMC meeting and hence boost the dollar. Other US indicators coming out include personal income and personal spending for October and University of Michigan preliminary consumer sentiment for December. Elsewhere, Canada publishes its unemployment rate and Germany its factory orders.
The Market EUR/USD
• EUR/USD moved lower, breaking below the short-term blue trend line, and found support at the 1.3578 (S1) barrier. I remain neutral on the pair, since only a break below that support level would be a reason to assume a change in the direction of the price action. Our short-term momentum studies confirm the weakness of the pair to continue its upside move, since the MACD crossed below its trigger line while the RSI found resistance near its 70 level and moved lower. On the other hand, the rate is still trading above both moving averages.
• Support: 1.3578 (S1), 1.3500 (S2), 1.3414 (S3)
• Resistance: 1.3662 (R1), 1.3731 (R2), 1.3820 (R3).
EUR/JPY
• EUR/JPY hit the 139.57 (R1) resistance barrier and moved lower. I would expect further consolidation or a downward corrective wave during the day, since the RSI seems ready to exit its overbought zone and the MACD, although in a bullish territory, lies below its trigger line. However, overall the pair remains in an uptrend, as confirmed by the blue uptrend line and the bullish cross of the moving averages.
• Support: 138.00 (S1), 137.100 (S2), 135.91 (S3).
• Resistance: 139.57 (R1), 142.53 (R2), 146.82 (R3).
GBP/USD
• GBP/USD moved significantly higher, breaking above the 1.6375 barrier, but the advance was halted by the 1.6442 (R1) resistance level. A clear upward violation of that barrier may trigger extensions towards the 261.8% Fibonacci extension level of the downward wave prior to the uptrend, at 1.6536 (R2). Nonetheless, since the RSI is ready to cross below its 70 level, further consolidation or a pullback should not be ruled out. The short-term trend remains an uptrend, since the rate is trading above the blue trend line and above both the moving averages.
• Support: 1.6375 (S1), 1.6260 (S2), 1.6147 (S3).
• Resistance: 1.6442 (R1), 1.6536 (R2), 1.6736 (R3).
Gold
• Gold escaped from its downward sloping channel and is now moving in a consolidative mode, forming a possible ascending triangle. An upward violation of the 1254 (R1) hurdle would signal the completion of the formation and trigger bullish extensions towards next resistance areas. Short-term momentum studies favor the upside exit of the triangle, since the RSI follows an upward path, while the MACD lies above its trigger line and is ready to get a positive sign.
• Support: 1227(S1), 1211 (S2), 1177 (S3).
• Resistance: 1254 (R1), 1269 (R2), 1290 (R3).
Oil
• WTI moved higher to give another test to the 93.14 (R1) area. An upward violation of that hurdle followed by an upward break of the upper boundary of the downward sloping channel may be the first signal for a change in WTI’s direction. At the moment, the price is trading within the longer-term downward sloping channel, while the bearish cross of the moving averages remains in effect since the 23rd of September.
• Support: 91.20 (S1), 87.85 (S2), 84.00 (S3).
• Resistance: 93.14 (R1), 95.36 (R2), 98.81 (R3).
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Market Analysis 03/12/2013
Daily Commentary 03.12.2013, Time of writing: 03:30 GMT
The big picture The dollar gained against most major currencies on Monday after U.S. manufacturing data beat expectations. The U.S. Institute for Supply Management's index of national factory activity rose in November at its fastest pace since April 2011, rising to 57.3 from 56.4 in October. Friday’s non-farm payrolls report are expected to provide further clues as to when the Fed will start reducing its monthly $85 billion bond purchases. Across the Atlantic, a similar indicator beat expectations as well. Markit Economics reported that the euro zone's manufacturing PMI rose to a two-year high of 51.6 in November from October's 51.5. Germany's PMI came in at 52.7, however overall strength was undercut by a downturn in Spain and France. The yen came under pressure on speculation of further central bank easing in order to meet its 2% inflation target by 2015. That makes yen the best funding currency, in our view. The Australian dollar fell after the RBA left its benchmark interest rate unchanged at a record low 2.5% early Tuesday and reiterated that the currency is uncomfortably high.
Oil prices in Asia held onto overnight gains Tuesday morning on the PMIs, which showed industrial activity in the U.S. and China, the world's largest consumers of crude, beat expectations. In China on Monday, the Chinese HSBC Manufacturing PMI came in at an unchanged 50.8 in November, beating market calls for a decline to 50.5. Gold prices eased slightly in Asia Tuesday on firming expectations for the Federal Reserve to begin scaling back monetary stimulus programs in early 2014.
A quiet Tuesday today. The only important indicators coming out during the European session are the UK construction PMI for November and Eurozone’s PPI for October. UK’s construction PMI is expected to decline to 59.0 from 59.4 in October, while Eurozone’s PPI is estimated to fall by 0.2%, a turnaround from +0.1% in September. Furthermore, Bank of England publishes the record of its financial policy committee meeting held on Nov. 20. Overnight, Australia publishes data on its GDP for Q3. The release is expected to show a rise of 0.7% qoq, an acceleration from +0.6% in Q2. This will bring the yoy rate down to 2.5% from 2.6%. We have only one speaker today. ECB’s Ewald Nowotny speaks at an event in Brussels.
The Market EUR/USD
• EUR/USD moved lower yesterday breaking below the 1.3578 barrier. I would expected the downward wave to continue until the pair finds support at the 1.3500 (S1) level, near the lower boundary of the upward sloping channel. However, the pair formed two higher lows and two higher highs of the same degree, raising the possibility for the establishment of a newborn uptrend. As long as the rate remains within the channel, I consider any corrective wave to be a renewed buying opportunity.
• Support: 1.3500 (S1), 1.3414 (S2), 1.3321 (S3).
• Resistance: 1.3578 (R1), 1.3662 (R2), 1.3731 (R3).
USD/JPY
• USD/JPY moved higher after consolidating near the 261.8% Fibonacci extension level of the 17th-25th Oct. downward wave. The price is now heading towards May’s highs at 103.60 (R1), where a decisive violation may trigger extensions towards the 105.24 (R2) resistance barrier, which coincides with the 423.6% Fibonacci extension level of the aforementioned downward wave. On the daily and weekly charts, the subsequent move upon the completion of the symmetrical triangle is still in progress.
• Support: 101.90 (S1), 101.12 (S2), 100.27 (S3).
• Resistance: 103.60 (R1), 105.24 (R2), 106.85 (R3).
EUR/GBP
• EUR/GBP violated the 0.8316 level, and reached the 0.8255 (S1) support barrier, near the lower boundary of the downward sloping channel. A break below that hurdle would target the next support at 0.8221 (S2). The short-term trend remains a downtrend, since the price is printing lower highs and lower lows within the blue downward sloping channel and the 50-period moving average lies below the 200-period moving average.
• Support: 0.8255 (S1), 0.8221 (S2), 0.8081 (S3).
• Resistance: 0.8316 (R1), 0.8385 (R2), 0.8413 (R3).
Gold
• Gold fell sharply, breaking below the lower boundary of the triangle and below the 1227 hurdle. At the time of writing, the yellow metal is trading slightly below that level and if the bears manage to maintain the price below it I would expect them to drive the battle below 1200. On the daily chart the metal violated the neckline (light-blue line) of a possible head and shoulders top formation, enhancing the possibility for further decline.
• Support: 1205(S1), 1180 (S2), 1156 (S3).
• Resistance: 1227 (R1), 1254 (R2), 1269 (R3).
Oil
• WTI rebounded from the 92.00 (S1) support barrier and violated the upper boundary of the downward sloping channel. A clear break above the 95.36 (R1) hurdle would confirm the change of WTI’s direction and may trigger bullish extensions towards the 98.81 (R2) resistance. On the other hand, a dip back into the channel will turn the bias to the downside again.
• Support: 92.00 (S1), 90.10 (S2), 87.84 (S3).
• Resistance: 95.36 (R1), 98.81 (R2), 101.10 (R3).
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Market Analysis 04/12/2013
Daily Commentary04.12.2013, Time of writing: 03:30 GMT
The big picture US stocks fell for a third straight day on Tuesday as investors took profits. Profit-taking also sent the dollar falling against most major currencies on Tuesday after unexpectedly strong U.S. manufacturing data strengthened the dollar on Monday. Investors will now wait for the release of the November jobs report on Friday. EUR/USD was little changed after recovering almost all of Monday's losses. An unexpected fall in Spanish unemployment in November strengthened the euro. The pound was near the highest since 2011 after release of a U.K. construction sector report that showed it expanded at the fastest pace in more than six years. The yen regained some lost ground as investors sought the relative safety of the Japanese currency amid declines in equities. Most Asian shares slumped on Wednesday as investors took profits from their recent rallies ahead of major risk events. The Australian dollar tumbled after the country's Q3 GDP came in weaker than forecast, highlighting the chances of further rate cuts by the Reserve Bank of Australia. Canada’s dollar was near a three-year low ahead of a central-bank rate decision today.
Gold and silver, which have benefited from the U.S. stimulus because of inflation fears, traded near 5-month lows. Oil prices jumped, futures hit five-week high supported by an unexpected drawdown in U.S. petroleum stocks and on news that a new pipeline would begin carrying crude oil to Texas refineries next month, which will reduce domestic crude stockpiles.
Following Monday’s manufacturing PMIs for November, today we get November’s service-sector PMIs from Italy, UK and the US. We also have the final service-sector PMIs for France, Germany and the Eurozone as a whole, as well as the Eurozone final composite PMI for the month. The UK service-sector PMI for November is expected to fall to 62.0 from 62.5, while the US ISM non-manufacturing PMI for November is forecast to decline to 55.0 from 55.4. Besides the PMIs, from the Eurozone we get GDP data for Q3 and retail sales for October. The second estimate of Eurozone's GDP for Q3 is expected to be the same as the initial forecast. Retail sales are expected to see no change in October vs a decline of 0.6% in September. In US, we get MBA mortgage applications for Nov. 29, ADP employment change for November, the trade balance for October and new home sales for both September and October (because of the government shutdown in October). ADP employment report is expected to show that the private sector gained 170k jobs in November, more than 130k in October, ahead of the US non-farm payrolls on Friday. US Trade deficit is estimated to have narrowed to USD 40.2bn in October from USD 41.8bn in September. New home sales are expected to be 429k in October vs 421k in August, the last month we have data for. Finally the Fed releases the Beige Book business survey, two weeks before the FOMC gathers to consider changes to its record stimulus. Elsewhere, Bank of Canada decides on its overnight lending rate, which is expected to remain unchanged at 1.0% Overnight, Australia’s Trade deficit for October is expected to have widened to AUD 350mn in October from AUD 284mn in September.
The Market EUR/USD
• EUR/USD moved higher after finding support near the 200-period moving average and the 1.3525 (S1) level. During the early morning, European trading, the pair is testing the 1.3600 (R1) hurdle, where an upward violation might target the next resistance at 1.3662 (R2) and the upper boundary of the upward sloping channel. As long as the rate remains within the channel the trend marked by the blue channel remains in effect.
• Support: 1.3525 (S1), 1.3414 (S2), 1.3317 (S3)
• Resistance: 1.3600 (R1), 1.3662 (R2), 1.3731 (R3).
EUR/JPY
• EUR/JPY continued consolidating below the 200% extension level of the downward wave prior to the uptrend. An upward violation of that resistance may target the next resistance of 142.53 (R2), near the 261.8% Fibonacci extension level of the aforementioned bearish wave. The pair remains in an uptrend, as confirmed by the blue uptrend line and the bullish cross of the moving averages.
• Support: 138.00 (S1), 137.100 (S2), 135.91 (S3).
• Resistance: 139.67 (R1), 142.53 (R2), 146.82 (R3).
GBP/USD
• GBP/USD moved higher yesterday, but after finding resistance at the 1.6442 (R1) level, declined slightly. The pair is currently trading above the 200% extension level of the 7th -12th Nov. decline. If the longs manage to maintain the price above that barrier, I would expect them to challenge once again the 1.6442 (R1) resistance, where a clear break may trigger extensions towards the 261.8% Fibonacci extension level of the pre-mentioned decline, at 1.6536 (R2). The short-term trend remains upward, since the rate is trading above the blue trend line and above both the moving averages.
• Support: 1.6346 (S1), 1.6260 (S2), 1.6147 (S3).
• Resistance: 1.6442 (R1), 1.6536 (R2), 1.6736 (R3).
Gold
• Gold moved in a consolidative mode, remaining slightly below the 1227 (R1) resistance barrier. If the bears manage to maintain the price below that level I would expect them to drive the battle below 1200. On the daily chart the metal is trading below the neckline (light-blue line) of a possible head and shoulders top formation, enhancing the possibility for further decline.
• Support: 1205(S1), 1180 (S2), 1156 (S3).
• Resistance: 1227 (R1), 1254 (R2), 1269 (R3).
Oil
• WTI rallied yesterday, violating the 95.36 barrier. At the time of writing the price is heading towards the resistance of 98.81 (R1). The 50-period moving average lies below the 200-period moving average, but is pointing upwards, thus a bullish cross in the near future would add significance to the continuation of the advance.
• Support: 95.36 (S1), 92.00 (S2), 90.10 (S3).
• Resistance: 98.81 (R1), 101.10 (R2), 103.15 (R3).
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