Key Economic Data - Coming Up Today(All Times GMT+3)
The recovery of the EURUSD has continued with the pair having risen to 1.2495. Since bottoming at 1.2248 the pair has moved higher first to 1.2447 and then extending higher at 1.2495. The pair is now trading at 1.2420 coming into the final day of the week. EUR Targeted LTRO take-up was lower than forecast with banks borrowing 129.8B from the ECB versus expectations of 148.2B. This is seen as a sign that the ECB will need to expand its policy to outright Quantitative Easing. This has not negatively affected the Euro, as it had already been priced in over recent weeks. French CPI contracted at a rate -0.2% painting a worrying picture for Euro Area inflation which is at risk of suffering subpar inflation or even deflation. US Core Retail Sales exceeded forecasts growing month to month by 0.5% boosting the outlook for the US and global economy. Today the main news to be released will be the GBP Construction Output, EUR Industrial Production and EUR Employment Change. In the US PPI and Core PPI followed by Preliminary University of Michigan Consumer Sentiment concludes the economic data for this week. Overnight Japanese Industrial Production data showed an increase whilst China Industrial Production declined from 7.6% to 7.2% and was lower than market expectations. Crude Oil has fallen below $60 a barrel for the first time in five years and a continuation of declining oil prices will push oil and resource stocks lower while benefiting stocks of companies such as airlines and those which benefit from lower oil input costs and those where consumer savings from lower energy costs directly affect their revenues and earnings. Gold is trading at $1224 after making a double to at $1240. Gold is around $100 higher than last month's low at $1130.
From the 15.09.2014 with the EURUSD at 1.2977 I initiated an outlook that the EURUSD remains bearish. I had included the following sentence in each daily article for these past three months as we have worked our way down by 725 pips to 1.2251:
At present the Euro is under pressure with the pair below 1.30 and still trading below the downtrend channel as seen in the H4. As long as the pair remains below 1.30 and below the downtrend channel, the bias remains bearish. - This has been our consistent outlook for three months.
My outlook has now changed to neutral and cautiously bullish on EURUSD. There is one short term factor behind this change as well as two longer term factors. The first factor which is short-term but could provide the catalyst for an initial bounce is that the EURUSD has declined throughout 2014 from a yearly opening price at 1.3776 and there is a huge long USD short EUR exposure in the market. This means that in order to cash in on these short positions at some point they need to be bought back meaning plenty of buying interest in the EUR vs the USD. The main reason this could happen in December is this will allow the profits of the trades to be booked by banks and funds for the end of year performance. The second and longer term cause for a rebound revolves around the saturation of negative news and opinion on the EUR, the ECB has announced several initiatives with the lowering of interest rate, covered bond purchases and the plans for EU QE. At the same time in the US talk of interest rate rises have been ramped up as has been the value of the US although the Fed may find it difficult to follow through with rate rises considering the weakness in global economic growth and in Europe and China. These factors could support he Euro and weigh on the Dollar. Finally looking at the Daily and Monthly time frames on the pair it is possible to discern that the on the Monthly the first 3 months of the recent decline were heavy with large falls and full down candles. The following months of decline has seen the pair attempt fightbacks and there has been a progressive weakening in the penetration of the declines. Again on the Daily it is possible to see that whereas the market fell strongly and found no support on its way from 1.3990 to 1.2500 in the areas between 1.2251 and 1.2600 the EUR has begun showing signs of strength and an indicator that there is some life left in the battered Euro.The 1.2301, 1.2357, 1.2402 and 1.2444 levels are key pivot points to a recovery towards 1.2500 and above. The first two levels were broken this morning and 1.2402 and 1.2444 remain on the way to 1.2500. The EURUSD has already reached our target of 1.2500 and may extend to 1.2750 and 1.2883. At the same time following a 250 pip bounce from 1.2248 more caution may be required.
The RSI on the EURUSD Weekly Chart has crossed back above 30 climbing to 33.5. Readings of 30 and below on the RSI are considered oversold and this could raise the possibility of a near term recovery in the pair. A cross above 30 can be a bullish indicator. The next move will be to see if the RSI stabilizes and moves higher or if it will fall back towards the reading of 15 made in September this year. The EURUSD has declined for each of the last 5 months and opened for December at 1.2437. Any close above this level for December will break the run before it turns six consecutive months. At present e EURUSD is facing a 6th consecutive monthly loss.
EURUSD Support areas include 1.2320, 1.2300, 1.2250, 1.2200, 1.2150. Resistance levels above are at 1.2300, 1.2450, 1.2600, 1.2700, 1.2845, 1.2800, 1.2900 & 1.30.
EURUSD 5 Minute Chart
EURUSD 1 Hour Chart
EURUSD 4 Hour Chart
EURUSD Daily Chart
EURUSD Pivot Point Table