The common currency remains mute, in spite of another batch of positive European data, trading below the 1.0900 level against the greenback after the release of the German IFO survey. Confidence among German business rose to its highest in over two years, with the business climate index up to 110.5 in October. Expectations rose to 106.1 from previous 104.5, while the assessment of the current situation advanced to 115.00 from previous 114.7.
The EUR/USD pair bounced modestly in the European morning, following the release of generally positive European PMIs, although the pair remains below the 1.0900 level, not far from the 7-month low set at 1.0859. Preliminary October figures show that the EU as a whole grew at it’s a fastest pace so far this year, led by Germany. The EU Markit PMI composite printed 53.7, against previous 52.6, while German one came in at 55.1, against previous 52.8, both beating expectations. Later on the day, the US will offer a couple of FED's speakers, and the preliminary Markit Manufacturing PMI.
Majors are quietly consolidating this Wednesday, with the EUR/USD pair holding around the 1.1000 figure, ahead of a couple of major events that can rock the FX board. The third US presidential debate will take place by the end of the day in Las Vegas, the last one ahead of elections that will take place in just three weeks. So far, the democrat candidate, Mrs. Clinton, is having a marginal lead according to polls and media, which has brought some relief to markets. The other event is the ECB economic policy meeting next Thursday. The Central Bank is largely expected to remain on hold, with the focus probably set in Draghi's press conference, and whatever he has to say about the size of QE, whether if the Central Bank is willing to taper sooner than expected, or if they are planning an extension of easing next December.
The American dollar started the week advancing moderately, particularly against its European rivals, with the EUR/USD falling down to 1.0963 before bouncing modestly early London, contained however, by the 1.1000 psychological level. The release of September final inflation figures in the UE matched market's expectations and previous estimates, with the core Y-o-Y reading steady at 0.8%, having a null effect over the pair.
The dollar is back higher, particularly against the yen and its European rivals, as market sentiment improved overnight, following the release of better-than-expected Chinese inflation data. Consumer price index rose by 0.7% in September monthly basis, and by 1.9% from a year ago, the highest in four months. The producer price index in the same month, rose by 0.1%, up for the first time in almost four years.
The dollar remains firmly higher after the release of FOMC Minutes late Wednesday. The minutes brought no surprises, triggering limited moves across the FX board, but overall, keeping a rate hike on the table for before year-end.
Broad-based dollar demand sent the EUR/USD pair lower this Tuesday, as worldwide markets returned to normal following a long week-end. The pair extend its slide after London opening, having flirted with the 1.1105 level, from where it bounced modestly, meeting selling interest in the 1.1120 region. A better-than-expected German ZEW survey couldn't help the EUR, as the pair barely reacted to the release. Nevertheless, economic sentiment improved, both in Germany and the EU as a whole, for the first up to 6.2 from previous 0.5, while for the union, it came in at 12.3 from previous 5.4. The assessment of the current situation, came in at 59.5, beating expectations of an advance up to 55.5.
The week starts once again in slow motion, with holidays in Japan, the US and Canada, although the greenback is modestly higher following the US second presidential debate. Mrs. Clinton has once again emerged victorious according to the media, after a tough weekend for Mr. Trump, following the leak of a video with offensive comments about women, which resulted in some Republicans calling for him to quit the race. Still, thin volumes across the financial world are limited, and the EUR/USD pair trades modestly lower around 1.1180.
The AUD/USD pair fell down to 0.7560 at the beginning of the day, jumping up to 0.7609 with the release of the US employment report, but so far unable to regain the critical 0.7600 level. The Aussie is finding some support in the advance of US stocks' futures, and the short term picture is modestly bullish, as in the 1 hour chart, the price is above a slightly bullish 20 SMA while the technical indicators aim higher around their mid-lines, albeit it will take this candle to close to get a clearer picture. In the 4 hours chart, however, the risk remains towards the downside, as the 20 SMA and the 200 EMA converge around the mentioned high, capping the upside, while technical indicators have pared losses, and turned modestly higher, but remain within negative territory.
Downside limited despite tepid US employment report. The USD/JPY pair retreated from a high set at 104.15 during Thursday's American session, with the yen benefited by a spike or risk aversion following Pound's sharp decline. The release of a disappointing US jobs' report, showing less jobs created in September and a tick higher in the unemployment rate to 5%, sent the pair down to 103.20, but it bounced back quickly, with the downside limited by the strong bounce in US futures. Short term, however, the pair presents a bearish tone, as in the 1 hour chart, technical indicators head south within bearish territory, although the 100 SMA keeps heading higher around 103.00, providing an immediate short term support. In the 4 hours chart, technical indicators head sharply lower from overbought readings but remain within positive territory, while the price is well above its 100 and 200 SMAs, both in the 101.60/90 region.
GBP's depreciation took a turn to the worst after the past Asian opening, as the GBP/USD pair plunged around 700 pips, bouncing back around 500 pips, shaking the FX board and favoring an already strong dollar. The pair settled around 1.2400, but broke back lower following the release of worse-than-expected UK data, as total production output was estimated to have increased by 0.7% compared in August on a year-on-year basis, but fell by 0.4% when compared to July. Manufacturing increased by 0.5% from a year before, and by 0.2% in a month-on-month basis. Also, the trade balance showed that the UK's deficit on trade in goods and services was estimated to have been £4.7 billion in August 2016, a widening of £2.5 billion from July 2016. The GBP/USD pair traded around 1.2360 ahead of the release of US employment figures, and maintains the negative tone in the short term, given that in the 1 hour chart, the price is below a strongly bearish 20 SMA, currently around 1.2470, while technical indicators have resumed their declines within negative territory. In the 4 hours chart, indicators hold within extreme oversold levels, while the price is far below its 20 SMA, with technical indicators still distorted by the early plump. Nevertheless, the risk is towards the downside, and bounces are expected to attract selling interest, particularly if the pair is unable to regain 1.2500.
The EUR/USD pair recovered modestly from a daily low of 1.1104, a fresh 2-month low posted at the beginning of the European morning ahead of the release of the US employment report. The American dollar traded firmly against most of its major rivals for most of these last two days, accelerating its gains, particularly against its European rivals, with Pound's flash crash early Friday. A poor Nonfarm Payroll report, however, put the greenback on the back foot. The US economy added just 156K new jobs in September, against market's expectations of 172K. The unemployment rate ticked higher, up to 5% from previous and expected 4.9%. Average hourly earnings, which were expected to advance to 0.3% monthly basis, came in at 0.2%, while year on year basis, matched expectations by printing 2.6%, the only encouraging line in a generally disappointing report. Stocks traders are happily welcoming the news, with US indexes jumping higher ahead of the opening.
European equities opened with a firmer tone, with the German DAX up after Monday's holiday, and following the lead of Asia. The Pound plunged to fresh record lows, last seen in 1985, resulting in a firmer dollar all across the board. The EUR/USD pair fell down to 1.1164 following London's opening, holding nearby ahead of the release of the EU PPI for August. Later on the day, the US will offer a light calendar, with the ISM New York Index and the IBD economic optimism, none of them a big market mover, which means sentiment will keep on leading the way.
As fears of a Deutsche Bank collapse eased, so did risk aversion, and the week started with majors looking somewhere else for direction. A bank holiday in Germany is keeping movements limited around the EUR/USD pair, which remains confined to a tight range around the 1.1200 figure, despite encouraging Markit manufacturing PMIs readings in Europe.
The OPEC surprised markets late Wednesday, announcing an agreement to limit oil output to 32.5-33 million bpd, setting a committee to discuss the details, with the final deal to be signed in the next formal meeting, scheduled for next November. Crude oil prices soared, fueling the positive mood around stocks, the Canadian dollar rose alongside with oil, while the Japanese yen fell sharply. But the EUR/USD pair remains mute around 1.1200, with European majors unmotivated.
Following a slide down to 1.1181, a fresh weekly low, the EUR/USD pair quickly recovered the ground lost, as European equities bounced by the hand of a recovery in Deutsche Bank equities. The stock recovered over 3% in early trading, and is now up 1.85%, after a German newspaper reported that the government and financial authorities are preparing a rescue package, if the bank can't raise extra capital on the market. Risk aversion retreated during the past American session, as consumer confidence in the US, rose to its highest in nine years, pushing Wall Street higher.
The AUD/USD pair flirted with the 0.7700 level during Asian trading hours, fueled by improved market's sentiment, but is now under short term selling pressure, as stocks, and commodities are shedding ground quickly. The Aussie however, remains among the strongest currencies of the board, favored by rates differentials, as Australian rate stands at 1.5% in a world of negative benchmarks. The 1 hour chart for the pair shows that the price is breaking below its 20 SMA, while indicators head sharply lower within positive territory, suggesting the decline may extend towards the key 0.7600 support. In the 4 hours chart, the price is still above a flat 20 SMA, while indicators also turned lower, but are still above their mid-lines, not enough at this point to confirm a steeper decline.
The GBP/USD pair continues trading below the 1.3000 level, with approaches to the figure earlier in the day having attracted selling interest. The pair has recovered some ground ahead of the US session, but remains within its last week's lower range, with the Pound still pressured by Brexit woes. Short term, the risk remains towards the downside, as in the 1 hour chart, the price is moving back and forth around a horizontal 20 SMA, while technical indicators have lost upward strength around their mid-lines. In the 4 hours chart, the price is unable to advance beyond a bearish 20 SMA, although technical indicators have recovered within negative territory, and the Momentum aims north around its mid-line, not enough to confirm an upward extension, but limiting chances of a sharper decline.
Nervous, sentiment-related trading extended this Tuesday, with a sense of relief during the Asian session sending the Nikkei up and the Yen down, while European currencies mostly consolidated Monday's moves. The short lived positive mood came after the US Presidential debate, as Democratic Hillary Clinton, largely seen as more market friendly, was seen standing victorious. The London opening revived risk aversion, as local shares plummet, lead by banking-related equities, still in trouble and with the focus in the Deutsche Bank, undermined by a possible multibillion-dollar fine to be imposed by the US Department of Justice, for alleged wrongdoing a decade ago.
Yen's strengthens on risk aversion. As market sentiment deteriorated and stocks fell, the Japanese yen grinded higher against most of its major rivals at the beginning of the week, with the USD/JPY pair falling down to 100.34 so far this Monday. The JPY advanced in spite of BOJ's Kuroda comments, saying that the central bank stands ready to use every available tool to achieve its 2% inflation target. The pair bounced modestly from the mentioned low, but remains below 100.65, a major Fibonacci resistance now. The technical bias favors the downside, as the price is below a bearish 100 SMA, while technical indicator have bounced modestly from near oversold readings, but are far from suggesting an upward corrective move ahead. In the 4 hours chart, the Momentum indicator turned sharply lower and entered negative territory, but the RSI indicator stands flat around 38, indicating limited downside strength at the time being. If the upcoming US housing data disappoint, the pair can break lower and test the 100.00 level during the US session.
The GBP/USD pair trades near its recent lows, consolidating in the European session not far from a daily low of 1.2915. The UK released the BBA mortgage approvals for August, up to 36.997K showing that consumer credit continued to grow, although at a slower pace. Technically, the risk remains towards the downside in the short term, as in the 1 hour chart, the price is well below a bearish 20 SMA, whilst the Momentum indicator heads modestly lower within negative territory, and the RSI indicator consolidates around 31. In the 4 hours chart, technical indicators have lost bearish momentum but remain near oversold readings, while the 20 SMA gains some downward potential far above the current level, favoring a bearish extension on a break below 1.2910, the immediate support.