Key Economic Data - Coming Up Today(All Times GMT+2)
The EURUSD has climbed this morning to 1.2480 while the USDJPY has fallen to 116.89. The current price on the USDJPY is the lowest this month following concerted Yen strength. Crude Oil has fallen to $54.50 early this morning after trading as high as $58.70 a barrel yesterday. Gold has slumped below $1200 and reached as low as $1190.50. Last week Gold had touched $1240 and is now significantly lower having fallen by 4% in just a few short days. The falling Crude Oil and Gold price has sunk both the CAD and AUD versus the US Dollar. The AUDUSD has fallen to a new yearly low at 0.8200 and the USDCAD has risen from 1.14 last week to rise as 1.1670. The USDRUB made a new all-time high at 64.45 yesterday and led the Russian Central Bank to raise the main interest rate to 17.5% from 10.5%. The effect of the large rate increase was to strengthen the Russian Ruble and bring the pair back below 60. Also this morning UK Bank Stress Test Results were mixed with Lloyds and RBS scraping through the test while the Co-op failed and this led to a slight weakening in the GBPUSD. In Europe French Flash Manufacturing disappointed expectations with an outcome of 47.9 while the German number beat expectations at 51.2 vs 50.4. On the other hand French Flash Services were stronger than forecast at 49.8 vs expected 48.6 but the German figures came in at 51.4 lower than the expected 52.6. Still to come GBP CPI inflation data and House Price data as well as the German ZEW Economic Sentiment and EUR Trade Balance. In the US Building Permits, Housing Starts and Flash Manufacturing PMI will impact the USD from 13:30GMT.
Our View: Change to EURUSD Neutral/Cautiously Bullish at 1.2251 (08.12.2014)
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 wheras 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 35.8 against yestrday's 33.95 and Friday's 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. Current Price 1.2479.
EURUSD Support areas include 1.2450, 1.2400, 1.2320, 1.2300, 1.2250, 1.2200, 1.2150. Resistance levels above are at 1.2500, 1.2550, 1.2600, 1.2700, 1.2845, 1.2800, 1.2900 & 1.30.
EURUSD 1 Hour Chart
Gold 1 Hour Chart
USD/JPY 1 Hour Chart
EURUSD Pivot Point Table