EUR/USD had a choppy week amid market mood swings, another escalation in the Italian crisis, and quite a few Brexit headlines. What’s next? Inflation figures and the EU Summit stand out. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The European Commission rejected Italy’s budget again and is in favor of adopting disciplinary measures. On the other hand, Rome made positive noises about willing to negotiate. The spread between Italian and German bonds remained high. Brexit has its bumps but UK PM Theresa May managed to weather another storm.
EUR/USD daily chart with support and resistance lines on it. Click to enlarge:
- EU Summit on Brexit: Sunday-Monday. The UK and the EU reached a detailed agreement on the UK’s divorce from the EU. This will likely be signed off by all countries. Uncertainty remains about the political declaration about the future relationship. The sides will be negotiating various topics such as the status of Gibraltar which has infuriated Spain. UK PM Theresa May will try to achieve some small wins in the event in order to muster more support for the deal when it goes to parliament early in December. Headlines from the EU Summit will set the tone for the opening of the new week, mostly moving the Pound but also the Euro and other currencies. Reactions from Brexiteers in Britain also matter quite a bit.
- German Ifo Business Climate: Monday,9:00. Germany’s No. 1 Think-Tank showed a drop in sentiment among businesses in October: 102.8 points against 103.7 beforehand. The 7000-strong survey may drop once again in the report for November: a score of 102.3 is on the cards.
- Monetary data: Wednesday, 9:00. M3 Money Supply slowed down to an annual growth rate of 3.5% in September. The deceleration goes hand in hand with the slowdown in the economies. Private Loans grew by 3.1% y/y. We will now receive data for October. Money Supply is projected to stay unchanged at 3.5% and private loans carry expectations for a rise to 3.2%.
- German GfK Consumer Climate: Wednesday, 12:00. The survey of around 2000 consumers remained unchanged in October, standing at 10.6 points, defying expectations for a slide. It may drop in the fresh report for November. A small slide to 10.5 is predicted.
- German inflation: Thursday morning from the German states and the all-German figure is due at 13:00. The largest economy in the euro-zone saw prices rise by 0.2% m/m in October, setting the stage for a relatively high y/y increase. We may see a slowdown this time. Germany’s numbers shape expectations for the all-European number on Friday. Another monthly increase of 0.2% is on the cards.
- French Consumer Spending: Thursday, 7:45. Consumers in the second-largest economy in the euro-zone decreased their spending by 1.7% in September. The data for October could show a bounce back. An increase of 0.5% is forecast.
- French GDP: Thursday, 7:45. The previous release of Q3 growth data was quite upbeat: 0.4% q/q, better than the all-European figure of 0.2%. This release will likely confirm the initial figure.
- Spanish CPI: Thursday, 8:00. The fourth-largest economy saw a stable inflation rate in October: 2.3%, marginally above the euro-zone average of 2.2%. A significant slide is on the cards now: 2% is predicted.
- German Unemployment Change: Thursday, 8:55. The German labor market is booming for quite a few years, with consistent falls in the number of the unemployed. After a slide of 11K in September, another fall is likely in October: -10K is on the cards.
- German Import Prices: Friday, 7:00. Prices of imported goods and raw materials feed into inflation. Prices increased by 0.4% in September and another increase is likely in October: +0.4% is projected.
- German Retail Sales: Friday, 7:00. Consumers in the continent’s “locomotive have badly disappointed in recent months. The volume of sales increased by only 0.1% in September after two months of falls. Another increase may be seen now. An increase of 0.4% is expected.
- French CPI: Friday, 7:45. France saw an increase of 0.1% in prices back in October. It is the last major country to report inflation figures before the all-European number is due. A monthly drop of 0.2% is on the cards.
- Euro-zone inflation: Friday, 10:00. Similar to the US, the odds of a rate hike have recently dropped in the euro-zone. A fresh look at November’s preliminary inflation numbers will provide some insights into the next moves of the European Central Bank. Back in October, headline CPI rose by 2.2% while Core CPI bounced back to 1.1% after dropping below 1% beforehand. Headline CPI is forecast to decelrate to 2.1% while Core CPI is expected to remain unchanged at 1.1% y/y.
- Unemployment rate: Friday, 10:00. The unemployment rate has been falling gradually since peaking in 2013. It hit 8.1% in September and another drop cannot be ruled out for October: 8% is forecast.
* All times are GMT
EUR/USD Technical Analysis
Euro/dollar moved up and down and was supported by the 1.1365 level (mentioned last week). It later recovered only to drop to lower ground.
Technical lines from top to bottom:
1.1815 was the high point in September. 1.1750 held the pair no less than four times in July and remains a powerful level.
1.1720 is a veteran line that worked in both directions and it capped the pair in mid-September. 1.1650 was a swing low in late August and is very closely followed by 1.1615 which played a pivotal role.
1.1500 is a very round level and also capped the pair’s advance in early November. 1.1430 separated ranges during October and later capped the pair in late November.
1.1350 played both roles in November: initially as support, then as resistance, and as support once again. 1.1300 is a round number that held the pair in mid-August and late October |double-bottom) and also held the pair down in June 2017.
1.1215 is the low point it reached in November. Lower, we are back to levels last seen in 2017. 1.1100 and 1.10 are notable.
I am bearish on EUR/USD
The global slowdown is looming and Europe is not in the best place to weather it. The ongoing Italian crisis is not going to be resolved anytime soon.
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