The Euro continues to rise after hopes of a discussion with Merkel in Germany and touches the 1.1874 level
Data revealing that the Euro area economy picked up momentum in November lifted EUR/USD to its highest finish in five weeks. Germany’s Social Democratic Party said that they were open to talks with Chancellor Merkel. In Asia yesterday, Chinese stocks fell between 2-3% as Chinese authorities cracked down on the wealth management industry. The Dollar extended its losses against most of its Rivals in quiet holiday-thinned trading.
Euro Zone November Flash Manufacturing and Services PMI beat forecasts. Manufacturing PMI’s rose to 60.0 against 58.3 while Services climbed to 56.2 against 55.3.
French Manufacturing PMI’s rose to a ten year high of 57.5, beating expectations of 55.9. A gauge of German Manufacturing confidence rose in November to 62.5 from the previous 60.6.
Minutes of the European Central Bank’s last meeting did not reveal anything new with policy makers showing broad support for the taper decision.
The British economy grew 0.4% in the third quarter, matching expectations of 0.4%. The UK’s annual growth was 1.5% as forecast.
Canada’s Headline and Core Retail Sales in November missed expectations. Core Retail Sales slipped to 0.1% against forecasts of 0.9%.
New Zealand’s October Trade Deficit (just released) rose to -NZD 871 million, missing expectations of -NZD 750 million.
USD/DXY – slips to end down 0.13% at 93.126 (93.256 yesterday).
EUR/USD – climbs to 1.1852 (1.1825 yesterday) on bright economic data
USD/JPY – little-changed to 111.25 (111.18) with Japan on holiday
AUD/USD – extends gains, finishes at 0.7625 (0.7615 yesterday)
GBP/USD – mildly lower to 1.3303 from 1.3323.
Outlook: The Euro led the currency rally yesterday and that should extend to today. The Federal Reserve’s expectations that inflation will remain persistently low puts into question the number of rate hikes in 2018. This will keep the Dollar’s tone soft into the weekend. It was the Emerging Market currencies that started the Dollar’s decline earlier in the week. It would be wise to watch their performance today together with the Chinese markets.
There is little in the way of events and economic data today heading into the weekend.
Japan November Flash Manufacturing PMI: (GMT 12.30 am, Nov 24/Local Time 11.30 am, Nov 24) forecast: 52.6 from 52.8
German IFO Business Climate Index (GMT 9 am, Nov 24/Local Time pm, Nov 24) forecast: 116.6 from 116.7
US November Flash Manufacturing and Services PMI: (GMT 2.45 pm Nov 24/Local Time 1.45 am, Nov 25) forecast for Manufacturing PMI: 55.1 from 54.6; forecast for Flash Services PMI: 55.5 from 55.3
Trading View: The Dollar Index (USD/DXY) closed at 93.126, fresh five-week lows. Technical support comes in at 93.00, a break of which would see 92.80. Overall weakness in the Dollar will keep the USD/DXY topside limited to 93.40/50.
EUR/USD – traded to an overnight high of 1.18559. The immediate resistance between 1.1860/70 remains strong. Immediate support lies at 1.1820/30 and then at 1.1800. We would need to see a clean break above 1.1870/80 for the Euro to get back into the upper level of it’s September range. Germany’s political impasse remains. Reports of the Social Democrats being open to talks with Merkel supported the Euro. While markets have shrugged this off to the sidelines, the political situation bears watching. The speculative community is still long of Euro. Likely range 1.1810-1.1860. Prefer to sell rallies.
AUD/USD – extended its rally to close up at 0.7625 with the overnight high of 0.7639. AUD/USD failed to get above the immediate resistance at 0.7640/50. What happens in China today impact the Aussie. Immediate support comes in at 0.7600/10 and then at 0.7580. Likely range today 0.7610-50. Look to sell rallies.
USD/JPY – quiet day yesterday with Japan on holiday. Japanese Flash Manufacturing PMI data are due out today as Tokyo returns. Forecasts are for a slightly weaker reading. USD/JPY has immediate support at 111.10 (overnight low was 111.068). Immediate resistance can be found at 111.30 and then at 111.50. US fixed income markets were shut yesterday. Likely range today 111.10-111.60.
GBP/USD – bit of a non-event yesterday with the UK Q3 GDP results matching expectations. Brexit is back in focus as negotiations get under way today with PM May’s visit to Brussels. Britain seeks to secure a deal for the divorce bill next month. Much of the bad news of any uncertainty in Sterling has put aside with the focus back on the overall weaker US Dollar. For now. GBP/USD has immediate resistance at 1.3330 (overnight high was 1.3337). Immediate support can be found at 1.3285/90. Likely range today 1.3290-1.3330.
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