Wednesday's FX Analysis: EUR/USD, GBP/USD, AUD/USD
SGT Markets | Nov 22, 2017 05:14AM ET
EUR/USD
Federal Reserve Chair Janet Yellen stuck by her prediction that U.S. inflation will soon rebound but she is "very uncertain" about this and is open to the possibility that prices could remain low for years to come.
German Chancellor Angela Merkel, whose conservative bloc lost seats in September's election, said she would inform the German president that she could not form a coalition, after the pro-business Free Democrats withdrew from negotiations. Merkel said she would prefer a new election to ruling with a minority, but Germany's president told the parties they owed it to voters to try to form a government.
President Draghi said the ECB was becoming increasingly confident that the euro zone's economic recovery would continue but sluggish growth in wages meant monetary policy needed to remain easy.
German GDP (preliminary release) came better than expected. U.S. CPI steady after the last positive U.S. PPI release.
Goldman economists wrote that the U.S. economy's momentum will be helped by reconstruction following recent U.S. hurricanes and also by tax cuts being proposed, and they have raised their Gross Domestic Product growth forecast for 2018 to 2.5 percent and lowered their unemployment rate forecast to 3.7 percent by end-2018 and to 3.5 percent by end-2019. Though it will still be a long road ahead before President Trump signs tax reform into law, especially if the Republicans keep trying to tie in the Affordable Care Act.
Last U.S. Job Creation surged but missed Consensus; U.S. Wage Inflation flat. But it is ok, as hurricane-related disasters have weighed on the labor market over the past two months.
1.1756 is our first Support and in the case of a deeper breakout into 1.1655 area, then next Demand area will become 1.1590. In the case 1.175 will not be clearly broken down, then room up to 1.1856, first important Supply area.
Our special Fibo Retracement is confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Neutral
1st Resistance: 1.1856
2nd Resistance: 1.1990
1st Support: 1.1756
2nd Support: 1.1655
EUR
Recent Facts:
30th of June, German Unemployment Change + Eurozone CPI
German Unemployment Change Better than Expected, Eurozone CPI higher than Expected
Get The News You Want
3rd of July, German Manufacturing PMI
Better than Expected
5th of July, French Services PMI + German Services PMI + Eurozone Retail Sales
Better than Expected
18th of July, German ZEW Economic Sentiment
Worse than Expected
24th of July, German Manufacturing PMI + Eurozone Manufacturing PMI + Eurozone Services PMI
Worse than Expected
28th of July, German CPI
Better than Expected
31st of July, Eurozone CPI (Preliminary) + Unemployment Rate
Eurozone CPI (Preliminary) as Expected, Unemployment Rate Better than Expected
1st of August, German Manufacturing PMI + Unemployment Change
Worse than Expected
15th of August, German GDP (Preliminary release)
Worse than Expected
17th of August, Eurozone CPI
As Expected
22nd of August, German ZEW Economic Sentiment
Worse than Expected
23rd of August, German Manufacturing PMI
Better than Expected
25th of August, German Ifo Business Climate
Better than Expected
31st of August, German Unemployment + CPI (Preliminary release)
German Unemployment Worse than Expected, CPI Better than Expected
1st of September, Manufacturing PMI
Worse than Expected
7th of September, ECB Press Conference
Draghi said that growth projections were made considering EURUSD @1.18 level (the current or higher levels are considered due to excessive volatility and this is considered to be slowing down CPI measures) and in October some clearer actions will be taken in order to push inflation upwards (possibly by monitoring EURUSD and reducing overshooting in EUR currency levels).
13th of September, Eurozone Employment Change
Better than Expected
15th of September, Eurozone Wages, Trade Balance
Better than Expected
18th of September: Eurozone CPI
As Expected
19th of September: German ZEW Economic Sentiment, German ZEW current conditions
Better than Expected
22nd of September, German Manufacturing PMI
Better than Expected (at its highest since May 2011)
28th of September, Eurozone Inflation data
Worse than Expected
29th of September, German Unemployment Change
Better than Expected
25th of October, French and German Manufacturing PMI
Better than Expected
26th of October, ECB Interest Rate Decision and Press Conference
Dovish: ECB will extend those purchases to the end of September 2018, or beyond, if necessary
31st of October, Eurozone CPI
Worse than Expected
2nd of November, German Manufacturing + German Unemployment
Better than Expected
14th of November, German GDP
Better than Expected
USD
Recent Facts:
7th of July, Nonfarm Payrolls + Unemployment Change
Nonfarm Payrolls Better than Expected, Unemployment Change Worse than Expected
13th of July, PPI
Better than Expected
14th of July, U.S. Core Retail + U.S. CPI
Worse than Expected
20th of July, Philadelphia Fed Manufacturing Index
Worse than Expected
25th of July, Conference Board Consumer Confidence
Better than Expected
27th of July, Core Durable Goods Orders
Worse than Expected
28th of July, U.S. GDP (Preliminary release)
As Expected
1st of August, ISM Manufacturing PMI
Slightly Worse than Expected
2nd of August, ADP Nonfarm Employment Change
Worse than Expected
3rd of August, ISM Non-Manufacturing PMI
Worse than Expected (at the lowest since October 2016)
4th of August, Nonfarm Payrolls + Unemployment Rate
Job Market Better than Expected
8th of August, Job Openings
Better than Expected
10th of August, PPI
Worse than Expected
11th of August, U.S. CPI
Worse than Expected
15th of August, U.S. Core Retail Sales
Better than Expected
23rd of August, Manufacturing PMI and New Home Sales
Worse than Expected
29th of August, CB Consumer Confidence
Better than Expected
30th of August, ADP Nonfarm Employment Change + GDP
ADP Nonfarm Employment Change Better than Expected, GDP relevantly better than expected
1st of September, U.S. Nonfarm Payrolls + Unemployment rate
Worse than Expected
1st of September, ISM Manufacturing
Better than Expected
6th of September, ISM Non-Manufacturing PMI
Worse than Expected
13th of September, PPI
Worse than Expected
15th of September, Retail Sales
Worse than Expected
15th of September, Manufacturing Production + Industrial Production
Worse than Expected
19th of September, Building Permits
Better than Expected
20th of September, FOMC Statement + FOMC Press Conference
Fed confirmed inflation view, labour market growth and scheduled rate hikes
26th of September, Fed Chair Yellen speech
Federal Reserve to continue gradual interest rate hikes despite uncertainty about the path of inflation. It "would be imprudent to keep monetary policy on hold until inflation is back to 2%," she said.
28th of September, U.S. GDP + U.S. job market
Better than Expected
2nd of October, ISM Manufacturing PMI
Better than Expected
4th of October, ISM Non-Manufacturing PMI + ADP Nonfarm Employment Change
Better than Expected
6th of October, Nonfarm Payrolls + Unemployment Rate
Worse than Expected
12th of October, Core PPI
Higher than Expected
13th of October, Core CPI + Retail Sales
Lower than Expected
27th of October, GDP (Preliminary release)
GDP Higher than Expected
1st of November, FOMC Statement
Slightly Hawkish
3rd of November, Nonfarm Payrolls + Unemployment Rate
U.S. Job Creation Surges But Misses Consensus; U.S. Wage Inflation flat
14th of November, PPI
Higher than Expected
GBP/USD
The EU will be ready to offer its most ambitious FTA (free trade agreement) approach to the UK. During his speech, BoE Governor Carney said that "whatever happens, we will be nimble enough to move monetary policy to bring inflation back to that target while supporting the economy," and that Britain's core financial system would not be hurt by the outcome of the Brexit negotiations.
The greenback remained under pressure following reports that U.S. President Donald Trump's election campaign had been subpoenaed for documents in an ongoing investigation relating to possible Russian interference in the 2016 presidential election.
UK Retail Sales came better than expected. Last UK job market data also better than expected while UK inflation recently ticked down.
1.32 area has been already broken on the upside. And it looks like the next stop will be 1.3285 area.
Our special Fibo Retracement is confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2001:
Weekly Trend: Bullish
1st Resistance: 1.3285
2nd Resistance: 1.3362
1st Support: 1.3099
2nd Support: 1.3040
GBP
Recent Facts:
15th of June, Retail Sales
Retail Sales Worse than Expected,
20th of June, BoE Gov Carney Speech
Carney ruled out imminent rate hikes, warning of weak wage growth and a likely hit to incomes as Britain prepares to leave the European Union.
30th of June, GDP
UK GDP as Expected, with improving Current Account
3rd of July, UK Manufacturing PMI
Worse than Expected
4th of July, Construction PMI
Slightly Worse than Expected
5th of July, Services PMI
Slightly Worse than Expected
7th of July, Manufacturing Production
Worse than Expected
12th of July, UK Job Market
Better than Expected
18th of July, CPI
Worse than Expected
20th of July, UK Retail Sales
Better than Expected
26th of July, UK GDP release (Preliminary)
As Expected
1st of August, Manufacturing PMI
Better than Expected
2nd of August, Construction PMI
Worse than Expected (at the lowest since October 2016)
3rd of August, Services PMI
Better than Expected
10th of August, Manufacturing Production
As Expected
15th of August, UK CPI
Worse than Expected
16th of August, UK Job Market
Better than Expected
17th of August, Retail Sales
Better than Expected
24th of August, GDP (Preliminary release)
UK GDP (Preliminary release) as expected but Business Investment (Preliminary release) Worse than Expected
1st of September, Manufacturing PMI
Better than Expected
4th of September, Construction PMI
Worse than Expected
5th of September, Services PMI
Worse than Expected
8th of September, Trade Balance and Manufacturing Production
Better than Expected
12th of September, CPI
Higher than Expected
13th of September, Job Market
Better than Expected
14th of September, BoE Meeting Minutes
The BoE’s monetary policy committee voted 7-to-2 to leave interest rates at their current record low of 0.25% following its policy meeting but the bank said in its rate statement that the economy is looking slightly, so an interest rate hike move is likely “over the coming months” if the economy performs broadly in line with officials’ expectations
18th of September, Governor Carney Speech at IMF headquarter
De-integration effects of Brexit are likely to be inflationary but any rate hikes are expected to be gradual and limited
20th of September, Retail Sales
Better than Expected
29th of September, UK GDP
Worse than Expected
2nd of October, Manufacturing PMI
Worse than Expected
3rd of October, Construction PMI
Worse than Expected
4th of October, Services PMI
Better than Expected
10th of October, Manufacturing Production
Better than Expected
17th of October, UK CPI
Slightly Worse than Expected
18th of October, Job Market data
Wages Higher than Expected, Claimant Count Worse than Expected
19th of October, UK Retail Sales
Worse than Expected
25th of October, UK GDP (Preliminary release)
Better than Expected
1st of November, UK Manufacturing PMI
Better than Expected
2nd of November, Interest Rate Decision
Dovish Bank of England raised interest rates but said that any further hikes would be at a gradual pace and to a limited extent
10th of November, Manufacturing Production
Better than Expected
14th of November, UK CPI
Higher than Expected
15th of November, Job market
Better than Expected
16th of November, Retail Sales
Better than Expected
USD
Recent Facts:
See above.
AUD/USD
Eyes on today Fed FOMC Meeting.
RBA’s Lowe said no strong case for near-term change in interest rates but more likely next move in rates is up rather than down. Weakening case for lower rates as the economy picks up.
Last Australia Employment Change came worse than expected (amid many recent weak data from Australian economy).
Australia's central bank has cut its forecasts for core inflation which it no longer expects to reach the floor of its 2%-3% target band until early 2019, a strong signal that rates won't rise for a long time to come.
"Inflation and wage growth remain low. Both are expected to increase only gradually over time," Governor Phil Lowe said.
Australia Retail Sales came clearly worse than expected, also Australia AIG Manufacturing Index disappointed analysts’ expectations.
As we wrote previously, we are Bearish from 0.774 and a confirmed breakout of 0.768 area can lead down to 0.757 area. Now that that level has been hit we are Neutral as we expect a consolidation phase.
Our special Fibo Retracements are confirming the following S/R levels against the Monthly and Weekly Trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Neutral
1st Resistance: 0.7680
2nd Resistance: 0.7735
1st Support: 0.7570
2nd Support: 0.7480
AUD
Recent Facts:
4th of May, Australia New Home Sales + Trade Balance
Worse than Expected
9th of May, Australia Retail Sales
Worse than Expected
18th of May, Australia Employment Change
Better than Expected
24th of May, Australia Construction Work Done
Worse than Expected
24th of May, Moody’s Credit Rating on China
Moody's Investors Service downgraded China's credit rating to A1 from Aa3, changing its outlook to stable from negative
25th of May, OPEC Meeting
OPEC decided to extend production cuts by nine months to March 2018
30th of May, Building Approvals + Private House Approvals
Better than Expected
1st of June, Australia Retail Sales
Better than Expected
6th of June, Reserve Bank Of Australia Interest Rate Decision and Statement
In the last meeting, the Reserve Bank of Australia held Interest Rates at 1.5% as expected, reporting that the current account’s deficit widened
7th of June, Australia GDP
Better than Expected
15th of June, Australia Employment Change
Better than Expected (3rd month in a row)
29th of June, HIA New Home Sales
Better than Expected
4th of July, Retail Sales
Better than Expected
4th of July, Reserve Bank of Australia Interest Rate Decision
RBA holds Rates at 1.5%
6th of July, Australia Trade Balance
Better than Expected
11th of July, Home Loans + NAB Business Confidence
Home Loans Worse than Expected, NAB Business Confidence Better than Expected
12th of July, Westpac Consumer Sentiment
Better than Expected
20th of July, Employment Change + Unemployment Rate
Employment Change Worse than Expected, Unemployment Rate as Expected
25th of July, CPI + RBA Governor Lowe Speech
Worse than Expected
3rd of August, Trade Balance
Worse than Expected
4th of August, Australia Retail Sales
Better than Expected
9th of August, Westpac Consumer Sentiment + Home Loans
Worse than Expected
17th of August, Employment Change
Better than Expected but Full Employment Change negative
30th of August, Australia Building Approvals + Construction Work Done
Better than Expected
1st of September, AIG Manufacturing Index
Better than Expected
6th of September, Australia GDP
Worse than Expected
7th of September, Trade Balance + Retail Sales
Worse than Expected
14th of September, Employment Change
Better than Expected
19th of September, House Price Index
Higher than Expected
5th of October, Retail Sales
Worse than Expected
19th of October, Employment Change
Better than Expected
25th of October, CPI
Lower than Expected
1st of November, AIG Manufacturing Index
Worse than Expected
3rd of November, Australia Retail Sales
Worse than Expected
16th of November, Australia Employment Change
Worse than Expected
USD
Recent Facts:
See above.
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