EURUSD Closed the week unchanged as it was widely expected due to the holiday week of Thanksgiving and due to luck of high impact economic events. One of the lowest in volume and volatility week closed November with the pair virtually unchanged. Economic sentiment improved in euro area in November with a slight increase in confidence among consumers and retail trade managers, while confidence remained broadly unchanged in industry and services. While the pick-up will be appreciated by markets, the indicator remains stuck near multi-year lows. German inflation came in better at 1.2% as it was expected although it did not manage to push pair higher. For this week traders will focus on the US-China trade deal, as we are approaching the 15 December deadline for the US tariffs markets becoming more nervous on the outcome. Apart from that, Trump’s decision of signing of legislation Wednesday supporting the Hong Kong protesters drew a negative reaction from Beijing and adds more uncertainty to trade talks. Fears of renew the trade war has temporarily shifted, although not off the topic of tariffs. This time, US President Donald Trump has turned his attention to the European Union. It appears that a new front will open in the US-led trade wars. The United States Trade Representative is in the process of completing its investigation, under Section 301 of the Trade Act of 1974, of France’s Digital Services Tax (DST) and intends to issue its report in that investigation on Monday, December 2, 2019. At that time, the United States Trade Representative also will announce any proposed action in the investigation. Much like the reaction of the Chinese Yuan around negative US-China trade war headlines, the Euro took a dive below 1.1000 versus the US Dollar during the thinly traded pre-Thanksgiving holiday session. There has been some speculation that a response to the French digital tax may only be the beginning of an expanded EU-US trade war. If so, more weakness for the Euro may be on the way.
On this week’s economic calendar, we have on Monday, French Markit manufacturing PMI with expectations to remain unchanged at 51.6 and German Markit manufacturing PMI also unchanged at 43.8 US ISM manufacturing PMI expected lower at 48.3. On Wednesday, US ADP employment expected lower at 125K and ISM non-manufacturing PMI higher at 54.7. On Thursday, European gross domestic product expected unchanged at 1.2%. On Friday, German industrial production is pointing lower by -0.6% and the US nonfarm payrolls expected lower at 128K while the average hourly earnings to remain unchanged at 3%.
Technically, the picture is neutral after last week’s trading session managed to keep the critical support of 1.1000 (23.6%). If the pair close this week above 23.6% 1.1000 could help pair trade higher at 1.1090 (38.2%) alternatively a close below 23.6% 1.1000 will open the road for retesting 1.0900 (0%). Traders maintain open buy positions at 1.1088 and 1.1020 targeting profits at 1.1214 with stop losses at 1.0800. More aggressive buyers expected to appear at 1.0900
GBPUSD closed the week higher amid YouGov’s poll announcement. Boris Johnson’s Conservative Party is on course to win a large majority of 68 seats in the Dec. 12 vote, according to a YouGov poll, which used a technique that more closely predicted the 2017 election than standard surveys. The survey results appear to be good news for the pound as markets form a firmer view of a Brexit deal getting through, and in the same time reflecting some relief that political uncertainty will likely cease after Boris will officially form a government. As for the coming week we are expecting the pair to trade around the same levels as it is unlikely to have a new poll number that will negatively affect the pair, unless if, a much better than expected US nonfarm payroll number will come out.
On this week’s economic calendar, we have on Monday, Markit manufacturing PMI with expectations to remain unchanged at 48.3. On Tuesday, Inflation report hearing. On Wednesday, Markit service PMI expected unchanged at 51.6.
Technically the pair is still neutral. Pair broke and closed above the (38.2%) 1.2840 and this is keeping the picture neutral to positive. A break and close above support 1.2991 (formed the last 45 days) will push the pair higher at 1.3155 (50%). A close below 1.2840 this week will add downside pressure on the pair and extend the downside move at 1.2770. Traders keeping open their buy positions at 1.2869 targeting profits at 1.3374. We expect more buyers to benefit from range trading and start buying the dips as from 1.2770.
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