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Good day. Let's look at what we have this week:
EUR / USD
Last week, the euro / dollar is trading in a narrow range around the level of 1.1000. The Eurozone currency remains under strong pressure, but sellers are not yet active enough to break through strong support. On Friday, quotes fell to a minimum level from the beginning of October 1.0980, but could not gain a foothold and again rolled back above 1.1000.
The global macroeconomic picture remains unchanged. The long-term downtrend of the euro / dollar pair continues. After quotes rolled back to resistance 1.1170, the euro / dollar turned in a new phase of decline with the target of 1.0880, the lowest level since 2017. Despite three Federal Reserve interest rate cuts, the monetary stiff differential is still not in favor of the Eurozone. Last week, Fed Chairman Jerome Powell and several Federal Reserve officials repeatedly signaled a pause in rate cuts. The US economy is growing at a steady pace. Inflation remains below the target level of the regulator, but not as much as in the Eurozone. Three drops is enough for long-term recovery insurance. Of course, if the US and China cannot agree among themselves, and the war of tariffs continues, the economic downturn will force many central banks to continue their soft monetary policy. But while this option looks less likely, the Fed also has a certain margin of safety compared to other regulators.
In the short term, the euro / dollar is aimed at breaking the support level of 1.1000. In the foreign exchange market, low volatility will remain. Demand for more profitable currencies remains high, stimulating the growth of the US dollar against the euro. The attractiveness of carry trade increases the risk of a pair decline.
The dollar is supported by good macroeconomic data that is ahead of forecasts. In particular, last week the estimate of US economic growth in the third quarter was revised to 2.1%, compared with the previous 1.9%. There was also a steady increase in orders for durable goods, which indicates the stability of the economy in the long term. Strong data will support the US currency in the coming week, which may become crucial before the end of the year.
On Monday, ISM's manufacturing activity figures for major economies will be released, and US employment data on Friday. Activity in the manufacturing sector is recovering, and this is likely to be true for the US economy in November. The number of new jobs outside agriculture in the United States is projected to grow by 180,000–200,000. This is a good result that significantly exceeds the October figure and emphasizes the prospect of the US labor market and the economy as a whole.
In our forecast, we assume a decrease in the euro / dollar pair to the supports of 1.1000, 1.0980, 1.0950 and 1.0930, after which we expect a pullback to the level of 1.0980.
USD / JPY
In macroeconomic statistics coming out next week, the following indicators can be distinguished:
Australia will release the PMI in the manufacturing sector, TD Securities inflation data, the ANZ job index and the number of building permits. China will publish the PMI Caixin index in production.
In Switzerland, the real volume of retail trade and the index of business activity SVME are published. In Italy, Spain, Germany, the UK and the Eurozone, activity indexes in the manufacturing sector Markit will be released. The head of the European Central Bank Christine Lagarde will deliver a speech.
In Canada and the United States will become known indicators of business activity in the manufacturing sector. The United States will also publish the index of gradual acceleration of inflation from ISM and data on construction costs.
A meeting of the Reserve Bank will be held in Australia, the regulator’s decision on the interest rate and the accompanying statement will be published.
In the UK, BRC retail sales data will be released. In Switzerland - the consumer price index, and in the UK - an indicator of business activity in the construction sector. In the euro area will become known producer price index. ECB Vice President Luis de Gindos to deliver a speech.
In the United States will publish the Redbook retail sales index and the ISM indicator of business conditions in New York. The American Petroleum Institute will report on oil reserves last week.
Australia will release AiG's service activity index and Q3 2019 economic growth data. In New Zealand will publish an indicator of commodity prices from ANZ. In China, the PMI Caixin Service Index will become known.
In Spain, Italy, France, Germany, the UK and the Eurozone will publish indexes of business activity in the services sector. In the Eurozone, an indicator of business activity in production will also be released.
A meeting of the Reserve Bank will take place in Canada, the decision on changing the interest rate will become known, and a cover statement will be published. Canada will publish labor productivity data on this day. In the USA, the ISM index of business activity in the services sector will be released. Fed representative Randal Quorles will give a speech. Energy Information Management The US Department of Energy will present changes in commercial oil inventories last week.
Japan will publish data on investments in national and foreign securities. Bank of Japan representative Yutaka Harada will deliver a speech. Australia will release data on imports, exports and overall trade balance.
A meeting of the Council of Ministers of Finance and Economics will take place in the Eurozone. In Germany, production order data will become known. In the Eurozone will publish an updated assessment of economic growth in the third quarter of this year, the level of employment and data on retail sales.
Bank of Canada member Timothy Lane will deliver a speech. Also in Canada, there will be data on imports, exports and the general trade balance, Ivey business activity index. In the United States will publish the number of initial and repeated applications for unemployment benefits, data of production orders and trade balance. Fed member Randal Quorles will give a speech. Energy Information Management The US Department of Energy will present changes in natural gas reserves last week.
Australia will publish an activity index in the construction sector. In Japan, there will be data on household spending, as well as an index of leading and matching indicators. OPEC meeting to be held in Vienna. In Germany, industrial production data will become known. In the UK, they will publish the Halifax Housing Price Index.
In the United States, employment market data will be released, including the number of new jobs outside agriculture, unemployment and average wages. In Canada, the unemployment rate, the change in the number of employees and the average hourly wage indicator will also be published. Baker Hughes will present changes in the number of active rigs in the US last week.
All good trading and profits !!!