Key Economic Data - Coming Up Today (All Times GMT+3)
The EURUSD rose sharply yesterday to 1.2887, rallying 260 pips (2.6cents). From a low price of 1.2625 the pair spiked up by just over 2% falling just short of 1.2900. Stock markets in Europe were in retreat mode and there were heavily declines in European and US as well as Asian benchmark stock indexes. Crude Oil fell as low as 80.01 to a new 2 year low, leading to a risk off sentiment in financial asset markets. The game changer was the weak Retail Sales and inflation data in the US. We had mentioned from the beginning of the week that the US Retail Sales were the most important economic data point this week. Once the data came in less than anticipated this led to a USD sell-off based on the premise that weakness in the US domestic economy combined with the current perception of slowing global economic growth would lead the US Federal Reserve to limit interest rate rises, or delay them and even opened up the possibility that tightening monetary policy may be put on hold and the economy may even require additional stimulus. This is negative for the USD and the Dollar crashed across the board vs EUR,GBP,AUD,JPY,CAD, Gold and other currencies. The recent stock market declines have been blamed on the declining oil price and new signs of turmoil in the Greek economy. Potentially the situation is far more complex. Here are a few factors: The recovery in the US economy is 6years old, since 2008, and usually there is a recession every 5-7 years on average. The Eurozone economy is very weak and may slip into recession, more importantly Germany and France are decelerating at a frightening rate in recent months. China's growth has moderated compared to the last decade of 10% annual growth, and add to the mix various wars, the new terrorist conflict with Islamic State and the trade wars with Russia,and there is a great deal to concern investors.
Here we noted all this week the shift in momentum and in the price pattern of the Euro:
"This is a key week in the EURUSD after the pair managed to fight back from the 1.2500 level. Following a recent run of continual declines in the pair this rebound opens up the possibility of a change in trend. The EURUSD declined for 12 weeks in a row before posting an increase last week. Holding above 1.2500 is imperative in building an upside breakout. A break below 1.2500 will signal a continuation of the recent downtrend."
Also the line below has been included in this report every trading day for more than a month.
"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."
I choose to keep this sentence as it still applies. I would like to emphasize now that the outlook is more mixed. The pair has re-entered the lower area of the downtrend channel but remains below 1.30. In order to reverse the trend we will need to see more strength out of the EURUSD. See the 4 Hour Chart.
EURUSD Support areas include 1.2700, 1.2600 1.2500, 1.2425, 1.2300. Resistance levels above are at 1.2800, 1.2800, 1.2900,1.30 figure level, followed by 1.3165.
EURUSD 30 Min Chart
EURUSD 4 Hour Chart
Pivot Point Table
The GBPUSD recovered from heavy declines on Tuesday and rose on Wednesday from 1.5875 to reach 1.6075 with a 200 pip rally following the poor Retail Sales figures in the US. The pair subsequently retested the 1.5875 area as seen in the 30 minute chart before again rising just above 1.6000, to 1.6025. The price is currently floating around 1.5990. Poor economic data earlier in the week pushed the pound below 1.60, but yesterday more encouraging data in the form of an increase in Average Earnings in the UK as well as decline in the Unemployment Rate from 6.1% to 6.0% improved the outlook for the UK economy and the strength of the GBP. We mentioned in yesterday's report that:
"The RSI on the 4 Hourly Chart had reached 66.5 at a price of 1.6113 and is now at 30.0 which is oversold territory."
The Pound then duly bounced from the oversold territory as indicated by the low RSI (Relative Strength Index) and rebounded higher to 1.6075.
Adding perspective to the present picture is the fact that the GBPUSD has declined from 1.7190 in mid July to sub 1.60 in mid October losing 13 cents in the process.
Today there is no economic data from the UK economy although US Industrial Production data and the Philly Fed Manufacturing Index could impact the pair.
Support levels for GBPUSD can be seen at 1.5900, 1.5850, 1.5800, 1.5725, 1.5650. Resistance to the upside at 1.6000, 1.6050, 1.6113, 1.6150, 1.6200, 1.6300
GBPUSD 30 Minute Chart
GBPUSD 4 Hour Chart
Pivot Point Table