EURUSD: Europe’s smooth inflation and U.S. NFP

2 дек.

The most important macro indicator posted during the previous week was the PCE indicator for October, a Fed's favorite inflation gauge. Posted data show that the PCE Price Index increased by 0,2% on a monthly basis, while core PCE was up by 0,3%. Both figures were in line with market expectations. Personal Income was increased by 0,6% for the month, while Personal Spending was higher by 0,4% in October. The PCE Price Index reached 2,3% on a yearly basis.

The CB Consumer Confidence in the US in November was increased to the level of 111,7, above market expectations of 110. On the opposite side, New Home Sales decreased by -17,3% in October for the month, highly above market forecast of -3,5%. Durable Goods Orders were higher by 0,2% on a monthly basis in October, modestly below market forecast of 0,3%. US GDP Growth rate, second estimate for Q3 was corrected a bit to the level of 2.8% from 3% posted previously, but was generally in line with the market expectations.

The German Ifo business Climate dropped in November to the level of 85,7, although market expectations were on a side of 86,3. The Ifo Current Conditions also slowed down in November to the level of 84,3 from 85,7 posted for the previous month. The GfK Consumer Confidence dropped to the level of -23,3 in December in Germany, again above market forecast of -18,7. The inflation rate in Germany preliminary for November is 2,2% y/y, while inflation on the monthly basis was standing at -0,2%. Retail sales in Germany dropped by -1,% in October for the month, bringing total retail sales to 1% increase on a yearly basis. The unemployment rate in Germany was flat in November at 6,1%. Preliminary inflation estimate in the Euro Zone in November is 2,3%, which is a bit higher from 2% posted for the previous month.

Although posted figures are showing a bit of increase of inflation in the Euro Zone in November, still, it did not impact the eurusd market to start a short term reversal during the week. The currency pair started the week at 1,0425 and was mostly oriented toward the upside. The highest weekly level reached was 1,059. The RSI also started a short reversal toward the upside, reaching the level of 40. This level still does not represent a clear sign that the market is ready to start a road toward the overbought market side. The moving average of 50 days made a clear cross, a so-called dead cross, with its MA200 counterpart, which is an indication of a potential for a trend change in the coming period.

The currency pair currently stands at sort of a cross-road. On one side, the level of 1,04 represents the last defense for a road toward parity. On the opposite side, eurusd showed that there is currently no strength for a clear move toward the upside. The highest weekly level of 1,059 does not represent any significant level for the currency pair, which might be an indication of a potential another move toward the 1,04 support line. The dead cross should also be taken into consideration, but for a longer time-scale. So, for the week ahead, there is higher probability for testing 1,04 support, while the move toward the upside might be an option only after NFP data, which are scheduled to be released in a week ahead.

Important news to watch during the week ahead are:
EUR: HCOB Manufacturing PMI final for November in Germany and Euro Zone, Unemployment rate in the EuroZone, HCOB Services PMI final for November in Germany and the Euro Zone, Retail Sales in the Euro Zone in October, Industrial Production in Germany in October,

USD: ISM Manufacturing PMI in November, ISM Services PMI in November, Fed Chair Powell speech, Non Farm Payrolls in November, Unemployment rate in November, Michigan Consumer Sentiment preliminary for December.