FXstreet.com (Barcelona) - Euro bears have taken over the single
currency throughout the duration of the week. Part of this weakness
exhibited by the euro comes from its own backyard, as demonstrated
by softer manufacturing and services flash PMI prints in the euro
zone members and the bloc as a whole, which collectively dampened
any attempt of recovery towards the fourth quarter. When comes to
projections, the relevant IFO series have greatly disappointed
investors, offsetting the improvement of the Gfk Survey earlier on
today. Other measures of consumer and business confidence in both
peripheral and core EU members have followed suit, exposing the
deteriorated situation prevailing in the bloc.
In the political arena, the situation does not look better either.
Despite the good performance of ECB's Mario Draghi before the
German Parliament, the euro has witnessed action only after the
later confirmed leak unleashed by the WSJ, that Greece would have
two more extra years to meet the EU requests.
The other reason behind the decline in EUR/USD since Monday can be
explained by a gradual shift away from risk-associated assets by
the market participants, intensified after US data out of durable
goods orders and the labor market weekly results have positively
surprised traders. With the focus on the US economy, Derek
Halpenny, European Head of Global Markets Research at BTMU,
comments "the real GDP data for Q3, released today, will be key for
Obama in selling to the electorate that the economy is on the mend.
Personal consumption is expected to accelerate from the subdued
1.5% pace in Q2, which will be further evidence that the US
consumer is feeling better. With so much uncertainty globally at
present, the dollar should at least remain firm".
… 1.3000 now in the rear view mirror?
With the cross penetrating the psychological mark of 1.3000 in the
mid week and actually consolidating below it, the FX community has
to be contemplating the likelihood of this correction lower.
Expert Karen Jones, at the German lender Commerzbank, argues that
the cross has resumed its downside towards the boundaries of 1.2900
and 1.2836 (MA200d), suggesting that a breach of it "would imply
that the market had topped and signal losses to the 1.2738 then
1.2605, the 38.2% and 50% retracements". She adds that rallies
would find the first hurdle at 1.3025/84, followed by 1.3140/80.
Following the same tone, Gareth Berry, analyst at UBS, confirms the
new neutral stance of the Swiss bank on the cross, assessing "the
recent weakness is approaching 1.2891; a break below would trigger
deeper correction to 1.2802 and then 1.2741. Resistance is at
1.3023-84".
In the view of Jane Foley, currency strategist at Rabobank, Spain
is posed to remain in center stage in the near-term, saying "while
the degree of any market tension over the weeks ahead will likely
be calmed by the knowledge that the ECB's OMT awaits, we see risks
of pullbacks in EUR/USD potentially to the 200 day sma at
EUR/USD1.2836".
When we analyze euro pairs and their relative positioning, it's
time for the Bullish Percentage Index (
BPI
) developed by FXstreet.com. The index has just printed below the
50 threshold, showing a reading of 42.11 at the moment, indicative
that less than 50% of the euro-based pairs are now on bullish mode
on point and figure charts. The development of the recent bearish
divergence between the BPI and some euro pairs would be consistent
with the actual selling pressure surrounding the shared currency.
… Light but interesting docket on Monday,
nonetheless
Japanese Retail Trade will be the initial spark for the FX trading
week, followed by Retail Sales in Spain. Mortgage Approvals in the
UK would give investors a gauge of the real estate sector in the
British economy. Inflation figures in Germany will also see the
light, following US Personal Consumption Expenditure.