Analys från DailyFX
FX Headlines: Europe in Data Spotlight with UK CPI, German ZEW Survey
Talking Points
– UK inflation is expected to remain on its downward trajectory.
– A further decline in UK CPI towards +2.5% will keep more QE from the BoE on hold.
– Extent of end of summer growth slowdown to be revealed with ZEW surveys today.
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EURO-ZONE ECONOMIC CALENDAR
Euro-Zone data cooled midyear but European Central Bank policymakers seem convinced that the near-term slowdown is just a natural part of the business cycle. Accordingly, as the ECB holds back on additional policy action, market observers are looking for clear signs of either a recovery that’s continuing or teetering before being sold on the Euro’s recovey.
The ZEW surveys today, particularly out of Germany, will suggest that any summer drag may be diminishing. The Current Situation component of the German ZEW survey is expected to rise to its highest level since June 2012, while the Economic Sentiment (“Expectations”) component will have held at its highest level since April 2010. Signs that the European economy is stabilizing without the additional prodding by policymakers should be considered EUR-bullish.
Read more: Euro Needs Signs of Continued Economic Recovery Before Next Rally
UK ECONOMIC CALENDAR
The stated goal of the Bank of England’s forward guidance policy is to keep interest rates low or lower until the Unemployment Rate falls to or below 7.0% over the next few years, unless of course inflation holds above +2.5% annualized through late-2015. Both of these objectives look on track, which is part of the reason why the British Pound has been so resilient since the early-2Q’13.
In line with weak labor wage growth and insulated purchasing power thanks to a stronger Sterling, UK CPI is due to fall back another one-tenth of one percent to +2.6%, the lowest rate in a year. Declining inflation figures typically lead to tighter monetary policy but in the case of the UK where inflation has been running well-above the BoE’s target for the past several years, a continued moderation of price pressures in context of a stable recovery will only further underpin a strong British Pound over the medium-term.
Read more: British Pound to Face Limited Correction on Stronger UK Recovery
SWISS ECONOMIC CALENDAR
There are no data due for the Swiss Franc on Tuesday, October 15.
Read more: Gold at Risk for Further Losses amid Imminent US Debt Deal
Want to automate your trading or trade baskets of currencies? Try Mirror Trader.
— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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