The EU stoxx 50 index was trading deep in the negative territory on Friday’s morning and the index was 0.60% weaker, trading around 3,550 EUR during the London session.
Sentiment in Europe was fairly negative and stocks continued in yesterday’s bearish reversal. Indices dropped further on Friday as traders began repricing the expectations of the ECB QE taper amid increasing inflation in the euro zone.
Thursday’s data showed inflation in the currency bloc raised to 1.5% from 1.4% previously, although it failed to reach the estimated 1.6%. In addition, the euro jumped above 1.19 again and might test the psychological level of 1.20 later in the day, which is not positive for EU stocks.
The technical situation doesn’t look very positive either. The EU50 index dropped below the short-term bullish trend line, which represented the consolidation pattern in the latest bearish trend. The next support is now at 3,545 EUR, which is currently being tested and if not held, further decline to previous swing lows around 3,520 EUR might occur. This looks a classic bearish continuation pattern in the current bearish wave which started in November.
The resistance is seen at the bullish trend line around 3,575 EUR and as long as the index stays below, the outlook seems bearish. The next selling zone is near 3,590 EUR. In all cases we strongly recommend to have rigorous money and risk management.
The greenback ticked higher on Thursday and the USDJPY pair was trading 0.50% higher during the London session, hovering around 112.40.
Japanese industrial production failed to match estimates and printed 0.5% month-on-month, which was notably below consensus of 1.9%. The last reading was revised upwardly to -1.0%. Housing starts deteriorated notably from -2.9% to -4.8%. The yen lost some ground after these number.
During the US session, the usual Thursday’s jobless claims are on the agenda, followed by the core PCE index, which is the most used inflation indicator by the Fed. In addition, personal spending and income numbers will be released.
Two FOMC speakers Quarlers and Kaplan will have speeches later in the evening. Furthermore, the Chicago PMI will most likely slow to 62.2 from 66.2 scored in the previous month.
The USDJPY pair made a false breakdown below the 200 and 100 moving averages and posted new swing lows, however, failed to hold them and traders bought the dip. The latest drop to new lows was only a bearish trap.
The support is now at the 111.70 level, where the mentioned moving averages are converged. If not held, further decline to 111.00 might occur. On the other hand, the resistance is seen at 112.60 and if broken, the pair might jump toward the 113.00 mark. In all cases we strongly recommend to have rigorous money and risk management.
Sterling pushed higher on Wednesday and was trading more than 0.60% stronger during the London session, hovering slightly above the 1.34 mark.
Cable jumped after news indicating that the EU and the UK have agreed on the so-called Brexit bill. The UK accepted EU’s demand for a €60bn financial settlement, ahead of the December 4th deadline set by the EU. Should this agreement pass, the negotiators might start discussing the very important trade deals, which could be positive for sterling.
Later in the day, the Bank of England Governor Mark Carney is due to speak about the Fair and Effective Markets Review at the Fixed Income Currencies and Commodities Markets Standards Board in London.
From the US Dollar point of view, the preliminary US GDP for the third quarter is due and should improve slightly to 3.3% from 3.0% previously. Additionally, the Federal Reserve Chair Janet Yellen will testify on the US economic outlook before Joint Economic Committee of Congress in Washington DC, which might spur some volatility on the financial markets.
The cable broke above the bearish trend line, which cancelled the bearish momentum. The resistance is now at previous lows near 1.3470 and if broken, sterling might advance toward 1.3552/60.
The support is seen at previous highs near 1.3340 and if not held, next buying zone is at the broken bearish trend line around 1.33. As long as the pound stays above, the outlook seems cautiously bullish. In all cases we strongly recommend to have rigorous money and risk management.
The so-called Kiwi was trading 0.15% stronger on Tuesday and the NZDUSD pair was hovering around 0.6925 during the London session.
Later in the day, the RBNZ’s financial stability report will be released, which should contain some new information about the planned removal of the loan-to-value restrictions in the country. This could be slightly positive for the New Zealand dollar. Shortly after the report, the RBNZ governor Wheeler will hold a press conference, which might be interesting for traders as well.
From the US dollar point of view, the consumer confidence gauge for November is due, expected to weaken slightly to 123.9 from 125.9. In addition, the new Fed chair Jerome Powell will testify on his nomination as the Federal Reserve Chair before the Senate Committee on Banking, Housing, and Urban Affairs, in Washington DC. Furthermore, two FOMC members Dudley and Harker will speak during the US session.
Finally, the US Treasury Secretary Steven Mnuchin is due to speak at the annual conference on the evolving structure of the US treasury market, hosted by the Federal Reserve Bank of New York.
The NZDUSD pair made a false breakdown below the October’ lows and surged immediately. Many traders might have been caught in short positions and had to exit their trades, which pushed the pair higher.
The intraday support is now seen at the 0.69 handle and if not held, further deterioration toward 0.6870 could occur. On the other hand, the resistance is seen at 0.6950 and if bulls will be stronger today, the next target would be around 0.6980. In all cases we strongly recommend to have rigorous money and risk management.
The US dollar slid on Monday and the dollar index was trading 0.15% weaker during the London session, hovering around 92.65.
Traders sold the greenback amid a week of important US data, including the speech of the new Fed’s chair Jerome Powell. Traders will also focus on the testimony of Janet Yellen.
There are no important data on the agenda today and therefore the current anti-dollar mood could persist throughout the day.
The greenback declined below the bullish trend line and also dipped below the 100 day moving average. Therefore, technical selling occurred and brought the US dollar further lower.
The next support appears to be around 92.05 and if broken, further decline toward the current cycle lows at 91.00 might occur. On the other hand, the resistance now stands at 93.50, where the 100 day moving average is located.
As long as the index trades below this level, the immediate outlook seems bearish and rallies could be sold. In all cases we strongly recommend to have rigorous money and risk management.