- SWFX market remains divided and acknowledges lack of unanimity between bulls and bears
- Pending orders in 100-pip range add to uncertainty as they are broadly neutral on Thursday
- Calm trading expected for second day on Friday
- Daily technical indicators changed back to bearish; weekly studies are mixed
- Economic events to watch in the next 24 hours: German Import Prices (Oct); French Consumer Spending (Oct); Spanish Flash CPI (Nov)
Spain's economy slowed in the third quarter, but remained on track to enjoy the strongest growth since 2007. The Euro zone's fourth biggest economy moderated to 0.8% in the September quarter, according to INE, following the 1% growth in the preceding three-month period. The reading marked the ninth straight quarter of growth. The biggest driver of the quarterly growth was the investment, which climbed 1.1%, followed by a 1.0% increase in household consumption. Exports surged 2.8%, while imports advanced 4.0% quarter-on-quarter. In the twelve months through September, GDP growth added 3.4%, compared with the second quarter's 3.1% expansion. Last year, the Spanish economy grew 1.4%, while this year the government is predicting a 3.3% GDP growth. Nevertheless, the economy is facing a number of headwinds. The jobless rate in Spain remains the highest in the currency bloc after Greece, while the European Commission warned that Spain is likely to fail to meet the agreed target to bring its budget deficit down to 4.2% of GDP from 5.8% of GDP last year. Moreover, Spaniards are heading to a December 20 general election, in which the current government of Prime Minister Mariano Rajoy is seeking for re-election.
Japan's consumer price inflation eased for the third month in a row, while household spending also dropped, putting greater pressure on the Bank of Japan to boost inflation expectations, while the world's third biggest economy is in recession. The disappointing data came despite signs that Japan's labour market remained tight, with the jobless rate at a two-decade low of 3.1%, compared with 3.4% in September. Inflation slid further away from the central bank's 2% goal in October, with the BoJ's preferred gauge, CPI that excludes fresh fruit and energy prices, climbing 0.7% last month following September's 0.9% growth. The national core CPI, which strips out only fruit prices, dropped at a steady pace of 0.1% year-on-year in October. At the same time household spending declined 2.4% last month from a year earlier, against economists' expectations for a 0.1% gain, while disposable income decreased 0.3%.
Upcoming fundamentals: Spanish prelim inflation and French consumer spending
Influence from the fundamental front will be weak on Friday. We expect to see no statistics from the US for a second day in a row, while European data will not become a trigger of volatility, judging from historical experience. Spain is due to publish the flash inflation numbers for November at 9:00 GMT. An annual decrease in consumer prices in estimated to soften from -0.7% to -0.5%. Meantime, the French consumer expenditures have probably grown by 0.2% in October on a monthly basis, following no change in September. The period will not include the period of the Paris terrorist attacks, which occurred this month and therefore were not included in today's upcoming reading.
EUR/USD to end the week in tranquil trading
EUR/USD continued to trade in a tight range on Thursday, owing to lack of major fundamental and technical drivers throughout the day. Closest support, namely the weekly S1 at 1.0586, is not considered as a very strong one. However, it may succeed in containing losses on Friday amid quiet end of the working week. Yesterday the total trading volume halved and reached the lowest level since May-end, which justifies current low turbulence in the FX market.Daily chart
Very few things have changed since our yesterday report on the Euro/Dollar cross. The pair is still driven somewhat downwards by 200-hour SMA at 1.0650. The pair sees this simple moving average as a very serious resistance, which will try to put even more pressure on the common European currency.
Hourly chart
SWFX sentiment shows no signals of either bullish or bearish lead
Expectations among OANDA and SAXO Bank traders remain mixed on Wednesday. OANDA clients believe the common currency has some growth potential as bulls are holding 52.41% of all open positions. In the meantime, 56.21% of SAXO Bank clients are short with respect to EUR/USD.
Spreads (avg,pip) / Trading volume / Volatility
Dukascopy Community members forecast the Euro to depreciate against the US Dollar this week
This week sentiment among traded who participated in the quiz deteriorated further, as only 35% of them expect the Euro to rebound in the period from Nov 23-27.
As Jignesh suggests, "Last week reaffirmed the markets that the ECB will continue further stimulus, if required, and the FED is ready for a lift off. It once again strengthens the point of divergence between the monetary policies of both economies."