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Analytics for a week (07.10-11.10 )

Euro \ dollar: Last week results and forecast for the upcoming period.

 

After falling to a new minimum level since May 2017, the euro / dollar pair moved into the stage of corrective growth. Quotes strengthened last week by almost 100 points to the resistance level of 1.0975. Weak macroeconomic statistics in the United States contributed to the recovery of the pair.

The US dollar fell after a decline in business activity in US industry to a ten-year low of 47.8 points. A score below 50 reflects a decline in the entire sector, so the drop in the index triggered a strong market reaction. The indicator of business activity in the service sector also turned out to be lower than forecasted, but so far it has been holding above level 50. The US labor market data for September were mixed. Unemployment fell to 3.5% from 3.7% in August and reached its lowest level since 1969. The number of new jobs increased by 136,000, which is 9,000 less than expected.

Slowing hiring and reducing production activity may lead to a decrease in the Federal Reserve interest rate at the end of October. Bond markets now estimate the probability of a decline of 87% from 40% at the beginning of the week. Federal Reserve Vice Chairman Richard Clarida said last week that global economic difficulties are damaging the US economy and the Fed will act appropriately. Markets see this as a direct indication of a change in rate.

Eurozone data last week was disappointing. Business activity in the manufacturing and services sectors in Germany and the Eurozone fell again. The economy of the region is approaching a recession. The United States plans to introduce tariffs on European aircraft, agricultural and other products from October 18. The likelihood of a technical recession is growing in Germany, where the manufacturing sector has slowed down particularly hard. Preliminary inflation data in the Eurozone for September showed a decrease in consumer price growth to 0.9%.

Despite weak economic data, the euro is recovering against the dollar. Since the beginning of the year, quotes have been moving according to the classical model: each time they drop slightly below the previous minimum and are restored after that before the next fall. The current correction may last; a strong resistance level is located in the area of ​​1.1030. Rising expectations for a cut in the US may support an upward momentum in the short term. In the future, we should expect a new phase of the fall of the euro against the dollar, as fundamental factors indicate the continuation of a long-term downtrend.

In our forecast, we assume further correction of the euro / dollar pair and increase to the resistance levels of 1.1000 and 1.1030, after which we expect a reversal and decrease in quotations to the levels of 1.0975, 1.0950 and 1.0920.

Economic statistics next week.

In macroeconomic statistics coming out next week, the following indicators can be distinguished:

Monday

In Japan, will publish indices of leading and coincident indicators. Australia will release TD Securities inflation data.

In Germany, data on industrial orders will become known, and in the UK - Halifax housing price index. Eurozone will present Sentix investor confidence indicator.

In the United States will publish the volume of consumer lending. Federal Reserve chief Jerome Powell will make a statement.


Tuesday

Japan will publish household spending and foreign trade balance. An indicator of the number of vacancies, indexes of conditions and confidence in the business environment of the National Bank will be released in Australia. The PMI Caixin index in the service sector will become famous in China.

In the UK, retail sales data will be published, and Bank of England head Mark Carney will speak. In Switzerland, the unemployment rate will be published, and in Germany - the level of industrial production. The ECB will host a meeting of the ECB, not directly related to issues of monetary policy. In Sweden, published industrial production data.

In Canada, there will be data on the construction of houses begun. In the United States will publish producer price index, Redbook retail sales index and NFIB business optimism indicator. Fed Chairman Jerome Powell will reiterate his statement. The American Petroleum Institute will present oil reserves last week.


Wednesday

Australia will release the Westpac Consumer Confidence Index.

A meeting of the Eurogroup will be held in the EU, where the Brexit agreement will become the main issue of discussion. In the UK will publish the minutes of the meeting of the Committee on financial policy.

JOLTS open vacancy data will be released in the USA. The Fed will publish the minutes of the meeting of the Open Markets Committee, which took place two weeks ago. Energy Information Management will present commercial oil inventories in the US last week.


Thursday

In Japan, there will be data on orders for engineering products and investment indicators in national and foreign securities. Australia will publish consumer price inflation expectations and mortgage data. New Zealand will release a monthly inflation report.

In Germany, data on imports, exports and the general trade balance will become known. A large block of macroeconomic statistics will be released in the UK, including: activity index in the services sector, industry and manufacturing data in the manufacturing sector, trade balance and monthly GDP growth rate. The European Central Bank will provide information about the meeting on monetary policy. In the evening, ECB representative Ville Lane will deliver a speech.

The US will publish the number of initial and repeated applications for unemployment benefits and inflation data, including basic and basic indicators of consumer prices. Energy Information Management will present changes in natural gas reserves last week.


Friday

In New Zealand, there will be an index of business activity in the manufacturing sector and retail sales data. Australia will publish a financial stability forecast and investment borrowing data.

A meeting of the Council of Ministers of Finance and Economics will take place in the Eurozone. In Germany, will publish indicators of growth in consumer prices. ECB Vice President Luis de Gindos to make a statement. In Canada, the unemployment rate, the change in the number of employees and the average hourly wage will be published.

In the US, there will be data on imports, exports and the general trade balance, a monthly report on the state of the budget and the consumer confidence index of the University of Michigan. Baker Hughes Unveils Active Rigs Last Week