Key Economic Data - Coming Up Today(All Times GMT+2)
The EURUSD rose as high as 1.2570 yesterday following strong economic data in the Eurozone. EUR Manufacturing PMI rose to 50.8 vs 50.1 last month and EUR Services PMI rose to 51.9 from 51.1. The data had helped the EURUSD climb above 1.2500 before the German ZEW Economic Sentiment and EUR ZEW Economic Sentiment blew out expectations with both indices rising above 30 from 11 the previous month. The strong sentiment data in addition to a 19.4B Trade Surplus vs 18.2B expected pushed the EURUSD to 1.2570. The price has since declined to 1.2455 following concerns that Greece will be led to an early election with the Socialist Party leader Tsirpas of Syriza the popular choice of Greek electorate. The party leader is known to be in favor of a Euro exit for Greece. Furthermore Euro traders are taking risk off the table with the FOMC Meeting this evening. The USDJPY trade has increased in volatility, the pair traded between 115.55 to 117.85. The USDJPY is currently trading at 117.22 towards the upper end of the range following USD strength. Crude Oil declined below $55 to $53.62 before a sharp relief rally to $57.12 in a 6% rally in less than three hours. This morning UK Average Earnings grew by a 1.4% annualized increase while the Claimant Count Change declined by 26,900 persons although he Unemployment Rate rose from 5.9% to 6.0%. Coming up today Euro Final CPI and Core CPI. At 13:30GMT US CPI and Core CPI data will be released for this month as well as the US Current Account. Crude Oil Inventories will be critical to the Crude trade today while the main attraction will be the FOMC Federal Funds Rate and FOMC Press Conference. The FOMC Statement and Economic Projection will outline the outlook of the FOMC and the planned policy direction and is sure to be heavily traded.
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 a high of 35.8 yesterday and is now at 35.2. 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 1.2470.
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
USD/JPY 1 Hour Chart
Crude Oil 1 Hour Chart
EURUSD Pivot Point Table