EUR/USD
retreated in the first week of 2013, after another attempt to break higher
evolved into a downfall. The fiscal cliff deal boost proved temporary after the
Fed showed less dovishness. The focus shifts to Europe, with an all-important
rate decision as well as employment data. Here is an outlook on the main
market-movers this week and an updated technical analysis for EUR/USD, now at
lower ground.
US politicians managed to avert the fiscal cliff,
but set the ground for another crisis in two months time: the initial market
cheer was also hit by Fed’s meeting minutes: is the central bank willing to
ease the easing at the end of the year? Not that fast, but the euro was already
hit. In the euro-zone, Spanish and German employment figures improved
considerably. On the other hand, the Euro zone economies are still in a
downward trend mainly Greece Spain, Italy and France struggling with high debt
and low growth. How does Mario Draghi see the situation? We will know this
week.
- Syntax Investor
Confidence: Monday, 9:30. Syntax investors’ survey showed
an improvement in investors’ confidence in December amid the European
Central Bank commitment to safeguard the euro. Investor Confidence
reached -16.8, following -18.8 in November but lower than the -16.2
reading predicted by analysts. A further improvement to -13.7 is expected
now.
- PPI: Monday,
10:00. Euro zone factory prices climbed a moderate 0.1% in October, in
line with the slowing pace in consumer inflation, although higher than the
flat reading forecasted by analysts. On a yearly base, producer price
index was up 2.6% in October compared to the same month a year ago.
A drop of 0.1% is forecasted now.
- German Trade Balance: Tuesday,
7:00. Germany’s trade surplus contracted in October to 15.2 billion Euros
from 16.9 billion in September, the lowest reading since March and also
below the 15.9 billion forecasted. The reading indicates a contraction in
the fourth quarter. Surplus is expected to narrow to 15.9 billion.
- French Trade Balance: Tuesday,
7:45. France’s trade deficit contracted for a second month in October, to
4.7 billion Euros from 5.0 billion Euros in September, amid a modest rise
in exports. Meantime imports dropped to 42.467 billion Euros from 42.535
billion the previous month. Deficit is expected to reach 4.87 billion.
- Retail Sales; Tuesday,
10:00. Retail sales across the European Union
dropped considerably more than forecasted in October, down by 1.2% while
anticipated a small drop of 0.2%, following a 0.6% fall in the previous
month. The main cause for this slump is the sharp decline in Germany. This
is further evidence to the gloomy situation in EU’s households. A rise of
0.5% is expected now.
- Unemployment Rate: Tuesday,
10:00. The euro zone’s unemployment rate reached a new record high in
October climbing to 11.7% from 11.6 % in September and 10.4% a year ago. A
further increase to 11.8% is expected this time.
- German Factory Orders: Tuesday,
11:00. Demand for German products rebounded unexpectedly in October with a
3.9% rise after a revised drop of 2.4% in September. Foreign demand was
the driving force behind this jump, rising 6.7%. On an annual basis,
orders were still behind last year’s levels, shrinking 2.4% in
October compared to the same month a year ago. A drop of 1.4% is
forecasted now.
- German Industrial
Production: Wednesday, 11;00. German output plunged in
October by 2.6% following a 1.3% decline in September indicating EU
recession may be catching up with Germany. The main drop occurred in
durable and capital goods production. The fourth quarter is expected to
register contraction despite the holiday season shopping. An increase of
1.1% is expected now.
- French Industrial
Production: Thursday, 7:45. French manufacturing declined
by 0.7% in October, following a 2.7% slump in the previous month.
The main decline occurred in transport equipment activity. The French
Government is planning to grant a billion-euro tax break to compensate for
spending cuts and higher consumer taxes. A rise of 0.2% is predicted.
- French CPI: Thursday,
7:45. Consumer Price index (CPI) declined by 0.2%, following a climb of
0.2% in October. On a yearly base, CPI rose by 1.4%. The main cause for
this decline was lower prices for energy product. An increase of 0.4% is
forecasted this time.
- Rate
decision: Thursday, 12:45. Press conference at 13:30. There
is more than a 50/50 chance that the ECB will cut the main interest rate
from 0.75% to 0.50%, but this isn’t priced in. With PMIs pointing to
more weakness in manufacturing and with a weak holiday season, the
ground is ready for the ECB to act. In addition, inflation is almost at
the 2% target, and is forecast to slide. Mario Draghi will probably
refrain from pushing the deposit rate into negative territory and leave
this policy option to a future deterioration. It’s important to note that
bond yields of Spain and Italy are significantly lower now. The negative
rate ammunition could be kept dry for another round of the crisis. If the
ECB does announce a negative deposit rate, this would be another step in
the “currency wars” and the euro could tumble down.
- French Gov Budget
Balance: Friday,
7:45. The French government budget deficit increased in October to €94.6
billion, up from a deficit of €85 billion in the previous month. However
on a yearly basis, deficit contracted by €4.8 billion from €99.4
billion recorded in October of the previous year.
*All times are GMT.
EUR/USD Technical Analysis
€/$ began the week with another attempt to tackle
the 1.3290 line (discussed last week). After this attempt failed, it was all
downhill from there, and the pair found support only at the very round 1.30
line. It finally closed at 1.3068.
Technical lines from top to bottom:
In the distance, 1.3480 was the peak seen in
February and provides a significant backstop to 1.34. 1.34 was a stubborn cap
during the spring of 2012 and is the far line in the distance.
The next stepping stone is at 1.3350, which
worked as a pivotal line in the past. Below, 1.3290 served as resistance before
the pair collapsed in May, and despite a small breakout in December, the line
remains intact -Yet another, third attempt to break higher, failed and the pair
eventually collapsed in January.
1.3240 was now a pivotal line in the middle of
December’s high range. It separated trading zones more than once in December
and also provided some support in January. 1.3170, which was the peak of
September, served as support for the pair after the break in December and is a
key line on the downside.
1.3130 proved to be strong resistance during
December 2012 and now switches positions to support. 1.3110 is a minor line
after working as temporary resistance in December 2012.
1.3030 provided some support at the same period
of time, and also at the end of November 2012. Both are minor in comparison
with the next line. The very round 1.30 line was a tough line of
resistance for the September rally. In addition to being a round number, it
also served as strong support. In January 2013 it served as the last line of
support, at least for now.
It is closely followed by 1.2960 which provided
some support at the beginning of the year and also in September and October –
the line is strengthening once again after temporarily cushioning the fall
during December.
1.2880 provided some support in October and also
in late November and December. It proved to be a backstop on the initial false
rally after Obama’s victory. 1.28 is the bottom border of the range, and was
eventually left behind. The pair fell to this low in September and later got
close to it.
1.2750 capped the pair after the Greek elections
and also had a similar role in the past. It is now a pivotal line in the
range. 1.2690 was the new low after the November breakdown, and also
provided support on a second downfall attempt in November 2012.
1.2624 was the low in January and now serves as
weak support, 1.2590 was a cap during August, before the pair surged.
Below, the round number of 1.25 is not only of
high psychological significance (USD/EUR 0.80) but also worked as support
during the summer of 2012. 1.2440 is already a stronger line that was a clear
separator during August.
Uptrend support lost
The thick black line on the chart shows uptrend
support that began in mid-November. his line was broken in the recent downfall,
and this serves as a bearish sign.
I am bearish on EUR/USD
If the fiscal cliff deal was not enough to hold
the pair high, the focus now turns to Europe, and despite some green shoots,
the situation is deteriorating. PMIs show an ongoing recession, retail sales
aren’t improving and the debt crises are only on hold. On this background,
Mario Draghi could certainly act, or at least hint on action and warn about the
situation. With open ended QE in the US (where the economic situation is
improving on many fronts) and a clear effort to weaken the yen in Japan, Draghi
could also join the currency wars in one way or another.
forex , forex signals, free forex
signals, free forex signals in sri lanka, best forex tips, free fx signals,
forex sinhalen, forex sri lanka, forex sinhala,
