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EUR/USD forecast for the week of December 8, 2014
The EUR/USD pair initially tried to rally during the course of the week, but found the 1.25 level to be far too resistive. That being the case, the market fell rather hard. However, we believe that there is still more downtrend left in this market, and we had to the 1.2050 level. Ultimately, we believe that you cannot buy this market, and it is not until we get above the 1.30 level that we would even consider buying. Obviously, that’s not going to happen anytime soon as there is still plenty of bearish pressure.
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EUR/USD Forecast Dec. 8-12
EUR/USD fell to new lows and could not recover as the dollar stormed on and despite no immediate action from the ECB. The central bank is the star of the upcoming week as well with the TLTRO results, alongside other data. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Draghi did not deliver QE this time, and adopted a “wait and see” approach, with readiness to act early in 2015. However, his support of the idea, the severe cut in forecasts and the fact that these forecasts did not factor the recent fall in oil prices all show that it is probably a matter of time. Subsequent report imply that a large program is in the works. Apart from that German factory orders shined and PMIs were mixed. In the US, the Non-Farm Payrolls report was superb with a 321K job gain and finally a bump in wages. This helped push the euro back down to fresh 2 year lows.
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EURUSD weekly outlook: December 8 - 12
The euro dropped to two-year lows against the dollar on Friday after the U.S. nonfarm payrolls report for November showed that the U.S economy added jobs at the fastest rate in nearly three years, highlighting the diverging recovery in the U.S. and the euro zone.
The Labor Department reported that the U.S. economy added 321,000 jobs in November, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
The report also showed that average hourly earnings rose by a larger than forecast 0.4% and were 2.1% higher on a year-over-year basis.
EUR/USD fell to two-year lows of 1.2272 and settled at 1.2281, off 0.78% for the day. For the week, the pair was down 1.24%.
The unusually strong jobs report prompted markets to bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 ahead of the data.
The euro had moved broadly higher on Thursday after European Central Bank President Mario Draghi indicated that it would not embark on quantitative easing for now, saying the bank would reassess its stimulus program in the first quarter of 2015.
He said the bank could potentially change the size, scale and composition of its existing stimulus programs and added that governing council remained unanimous that it would take further measures if needed.
The ECB also substantially revised down its forecasts for growth and inflation and warned that the latest forecasts do not take into account the recent steep drop in oil prices.
The bank now expects the euro zone economy to grow by just 0.8% this year, 1.0% in 2015 and 1.5% in 2016. It cut its inflation forecast for this year to just 0.5% from 0.6% and to 0.7% in 2015 from 1.1%.
The euro rose to six-year highs against the yen on Friday, with EUR/JPY at 149.23 in late trade.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.50, the strongest level since March 2009 and ended the day up 0.82% to 89.39.
In the week ahead investors will be awaiting Thursday data on U.S. retail sales and jobless claims and Friday’s report on consumer sentiment for further indications on the strength of the economic recovery.
The euro zone economic calendar is light, with no major economic reports scheduled for release except for Friday’s report on industrial production.
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Bank on 'Super Mario' to give Europe a monetary jolt
From his office on the 41st floor of the gleaming new European Central Bank headquarters, Mario Draghi's view stretches far beyond Frankfurt's high-rise financial center and he doesn't like what he sees.
The darkening outlook for the euro zone's flat and nearly inflation-less economy, exacerbated by tumbling oil prices, is driving him inexorably towards radical action.
Bank on the ECB president to fight the risk of deflation with an expanded program of asset buying early next year, probably in March, despite deep misgivings in Germany's Bundesbank and from German public opinion.
Draghi has worked for months to build support for what would be the biggest leap in the 15-year-old bank's history -- printing money to buy euro zone sovereign bonds on a large scale, so-called quantitative easing or QE.
Germans are historically allergic to such a policy, which some fear could trigger 1920s-style hyperinflation, create asset price bubbles and give euro zone laggards an excuse to avoid painful economic reforms. Many believe it amounts to illegal financing of governments through the back door.
Draghi confronted such concerns head-on last week, saying that to allow inflation to remain far below the ECB's target of almost 2 percent would breach its mandate.
"Not to pursue our mandate would be illegal," he said, turning the legal argument on his German critics.
The bank has just lowered its inflation forecast for next year to 0.7 percent and that did not take account of the latest fall in oil prices.
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EUR/USD – new week, new 2 year lows
There is no rest for the falling euro. The common currency resumed its falls and is trading below Friday’s 1.2270 low level. German industrial output was OK, but OK is not enough. EUR/USD reached a new low of 1.2260.
The next support line is actually very close, but beyond this level, the road is open to very low levels.
German industrial output rose by 0.2% in October, as expected. However, this came on top of a downgrade of September’s data: from a rise of 1.4% to a rise of only 1.1%.
Yet Europe is not the only force in play: during the Asian session, Japan reported a worse recession than earlier reported. The world’s no. 2 economy squeezed by 0.5% in Q3 according to the final note. An upwards revision from -0.4% to -0.1% was expected.
Chinese trade balance data also disappointed: exports rose by only 4.7% y/y against +8% expected and imports dropped 6.7% against a rise of 3.8% predicted by economists.
This helps the dollar across the board, and the euro is certainly not immune.
Support is found at 1.2245, a line which had the same role back in 2012. Stronger support appears only at 1.2150 and then 1.2042, which is the July 2012 low.
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EURUSD fell hard during the session on Friday, as the nonfarm payroll number came out much stronger than anticipated. The pair made fresh lows, as the market close to just below the 1.23 handle. The pair should continue to move first towards the mid 1.21 yet eyeing 1.20 as the main bearish target.
Euro holds near 2-year lows vs. dollar
The euro remained near fresh two-year lows against the dollar on Monday, as comments by European Central Bank Governing Council member Ewald Nowotny further weighed on demand for the single currency.
EUR/USD hit lows of 1.2248 during European afternoon trade, the weakest level since 2012, and was last down 0.15% at 1.2263.
Sentiment on the euro remained vulnerable after ECB Governing Council member Ewald Nowotny warned that the euro zone economy is suffering a "massive weakening" and that there is a "high probability" that euro zone inflation would slow further in the coming months.
The comments came shortly after data showed that German industrial production rose just 0.2% in October, while September’s figure was revised down to 1.1% from 1.4% previously. The data fuelled concerns over the outlook for fourth quarter growth.
Markets were also jittery after revised data on Monday showed that Japan’s gross domestic product contracted by an annualized 1.9%, more than the preliminary estimate of a 1.6% decline.
On a quarter-over-quarter basis the economy contracted by 0.5% in the three months to September, compared to a preliminary estimate of a 0.4% contraction.
A separate report showed that Chinese exports rose just 4.7% in November from a year earlier, less than the expected 7.9% increase, while imports fell 6.7% on a year-over-year basis. The weak data added to concerns over a slowdown in the world’s second-largest economy.
Meanwhile, demand for the dollar continued to be underpinned after Friday’s particularly strong jobs report for November highlighted the diverging economic recovery between the U.S. and the rest of the world.
The U.S. economy added 321,000 jobs in November, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
The unusually strong data saw investors bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 before the report.
The euro was weaker against the yen, with EUR/JPY down 0.59% to 148.36, off the six-year peaks of 149.77 struck overnight.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.56, the strongest level since March 2009.The euro remained near fresh two-year lows against the dollar on Monday, as comments by European Central Bank Governing Council member Ewald Nowotny further weighed on demand for the single currency.
EUR/USD hit lows of 1.2248 during European afternoon trade, the weakest level since 2012, and was last down 0.15% at 1.2263.
Sentiment on the euro remained vulnerable after ECB Governing Council member Ewald Nowotny warned that the euro zone economy is suffering a "massive weakening" and that there is a "high probability" that euro zone inflation would slow further in the coming months.
The comments came shortly after data showed that German industrial production rose just 0.2% in October, while September’s figure was revised down to 1.1% from 1.4% previously. The data fuelled concerns over the outlook for fourth quarter growth.
Markets were also jittery after revised data on Monday showed that Japan’s gross domestic product contracted by an annualized 1.9%, more than the preliminary estimate of a 1.6% decline.
On a quarter-over-quarter basis the economy contracted by 0.5% in the three months to September, compared to a preliminary estimate of a 0.4% contraction.
A separate report showed that Chinese exports rose just 4.7% in November from a year earlier, less than the expected 7.9% increase, while imports fell 6.7% on a year-over-year basis. The weak data added to concerns over a slowdown in the world’s second-largest economy.
Meanwhile, demand for the dollar continued to be underpinned after Friday’s particularly strong jobs report for November highlighted the diverging economic recovery between the U.S. and the rest of the world.
The U.S. economy added 321,000 jobs in November, far more than the 225,000 forecast by economists and the largest monthly increase in almost three years.
September’s figure was revised up to 243,000 from a previously reported 214,000 and the unemployment rate remained unchanged at a six-year low of 5.8%.
The unusually strong data saw investors bring forward expectations for the first hike in U.S. interest rates to mid-2015 from September 2015 before the report.
The euro was weaker against the yen, with EUR/JPY down 0.59% to 148.36, off the six-year peaks of 149.77 struck overnight.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a peak of 89.56, the strongest level since March 2009.
source
EUR / USD fell as a result of German industrial production has disappointed investors, rising only 0.2% compared to October, a slower pace than the 1.1% of September.
The help was yet to fall in sovereign debt credit rating of Italy to just one level above speculative grade.
A test of the EUR / USD below 1.2250 could lead to the minimum of 2 August 2012 in 1.2130.
R3 - 1.24840
R2 - 1.24384
R1 - 1.23619
Daily Std. Pivot - 1.23163
S1 - 1.22398
S2 - 1.21942
S3 - 1.21177
In this situation the best way is to stay away from the market with all the noise today.
French Trade Deficit Unexpectedly Narrows In October
France's trade deficit unexpectedly narrowed in October for a third straight month, as exports declined less rapidly than imports, figures from the Customs Office showed Tuesday.
The trade deficit fell to EUR 4.608 billion from EUR 4.721 billion in September. Economists had forecast a larger shortfall EUR 4.900 billion. A year ago, the deficit was EUR 5.025 billion.
The trade gap narrowed for a third consecutive month from EUR 5.533 billion registered in July.
In October, exports were supported by very strong aerospace deliveries and the completion of major war material contracts, the agency said.