Euro rising after positive growth expectations in the euro zone and Dollar falling due to lack of agreement on the tax plan
Expected delays to tax cuts due to differences between the Senate and House Republican versions pushed the Dollar lower. The Yen rallied as risk sentiment soured. An upgrade to European growth forecasts lifted the Euro to its highest weekly close. The Dollar Index (USD/DXY) fell. Global yields climbed as stocks and bonds fell.
The European Commission upgraded its Euro Zone GDP for 2017 to 2.2% from 1.7% and to 2.1% from 1.8% in 2018.
Japan’s Core Machinery Orders dropped 8.1% against expectations of a 1.8% fall.
Japan’s Current Account Surplus narrowed to JPY 1.84 trillion from the previous JPY 2.27 trillion.
Australian Home Loans slumped 2.3% against a forecast rise of 2.5%.
China’s CPI rose 1.9%, slightly higher than the 1.8% expected by most analysts. China’s PPI was at 6.9% against 6.6% forecast, the same as the previous 6.9%.
UK RICS House Prices climbed 1% which missed against expectations of a 4% rise.
Germany’s Trade Surplus was slightly higher to EUR 21.8 billion from the previous EUR 21.3 billion.
US Jobless Claims rose to 239,000 against an expectation of 232,000.
Global stocks and bonds fell. The US DOW finished 0.5% lower at 23,453. (23,555. yesterday).
Yields were higher. The yield on the US Ten Year bond was up one basis point to 2.33%. Germany’s Ten-Year Bund yield rose 5 basis points to close at 0.37% due to the Euro Zone GDP upgrade.
USD – Index falls 0.46% to 94.446 (94.875)
JPY – US Dollar down to 113.13 from 113.78 yesterday.
EUR – rallies to 1.1647 (1.1597 yesterday).
GBP – up on broad-based US Dollar weakness to 1.3153 (1.3112 yesterday)
AUD- slightly higher to 0.7682 (0.7677).
Events and economic data releases today:
Australia – The RBA Monetary Policy Statement from its latest meeting is released: (GMT 12.30 am, Nov 10/Local Time 11.30 am, Nov 10)
UK September Manufacturing Production, Industrial Production, Trade Balance: (GMT 9.30 am, Nov 10/Local Time 8.30 pm) forecast for Manufacturing Production (m/m): 0.3% from 0.4%; forecast fo Industrial Production (m/m): 0.3% from 0.2%; forecast for Trade Balance (Deficit): -GBP 12.9 billion from -GBP 14.2 billion.
UK NIER GDP Estimate (GMT 1 pm, Nov 10/Local Time 12 am, Nov 11) previous figure: 0.4%
US Preliminary University of Michigan Consumer Sentiment Index: (GMT 3 pm, Nov 10/Local Time 2 am, Nov 11) forecast: 100.7 from 100.7
Trading View: Part of the Dollar’s strength this week has been driven by tax reform hopes. US Senate and House Republicans differ on the timing of Corporate tax cuts. If this divergence causes further delay to the passing of a US tax plan this year, the Dollar could come under renewed pressure. However, the US economy still continues to improve. And policy divergence between the Fed and other major central banks still favours the Dollar in the more medium term.
EUR/USD – rallied to an overnight high of 1.1655 before settling at 1.1645. Although the Euro was lifted by the upgrade in EU growth forecasts, there is strong technical resistance at 1.1670/80. The German 10 year bund yield climbed 5 basis points yesterday on the back of the upgrade. This should be Euro supportive. EUR/USD has immediate resistance at 1.1660 and then at 1.1680. A move above 1.1680 could see 1.1710. Immediate support lies at 1.1620 and 1.1600. Trading should be subdued today with the US holiday. While speculators remain long of EUR, it’s still a sell on rallies. Likely range today 1.1625-1.1675.
USD/JPY – slumped to 113.09 lows before settling at 113.13. The Dollar rose in early Asia to its current 113.45 as traders adjusted positions. Earlier this week we highlighted that speculative JPY shorts remain elevated, near multi-year highs. USD/JPY has struggled to trade much beyond 114.50. Risk appetite waned yesterday which is Yen supportive. USD/JPY has immediate resistance at 113.60 and then at 113.80. Immediate support is strong at 113.10. Likely range today 113.10-113.60. Prefer to sell rallies
GBP/USD – Sterling traded to a low of 1.3085 before rallying on the broadly weaker US Dollar to 1.3152 at the close. UK Prime Minister Theresa May’s government still faces political turmoil which is a headwind to the Pound. Supporting Sterling is the view that the BOE will gradually tighten policy. The six round of Brexit negotiations are under way. Markets will scrutinise developments. GBP/USD has immediate resistance at 1.3170 (overnight high was 1.3165). Immediate support can be found at 1.3125 and then at 1.3105. Likely range 1.3120-1.3170. Prefer to sell rallies.
AUD/USD – the Aussie benefited from general US Dollar weakness although it failed to gain much headway. Yesterday Australian Home Loans slumped 2.3% when a rise of 2.5% was expected. The recent string of poor economic data has weighed on the Australian Dollar. The RBA releases its Monetary Policy Statement from the August meeting. The statement provided an insight into the bank’s view of economic conditions and inflation, key factors that will affect their monetary policy decisions. Copper prices rebounded yesterday and this should provide some support for the Aussie. AUD/USD has immediate resistance at 0.7700 (overnight high 0.7694). Immediate support lies at 0.7660 and then at 0.7640. Likely range today 0.7660-0.7710. Prefer to sell rallies above 0.77 cents. Specs are still long AUD.
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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