German Ifo business climate rose to 17 month high of 94.7 in November and beat expectation of 94.5. Current conditions and expectations gauges also improved to 90.5 and 99.1 respectively. Ifo chief economist Gernot Nerb said that exports to China and to Asia are bringing some momentum in the manufacturing industry. Nevertheless, the optimistic report provides little support to Euro, which was pressured by credit concerns in the Eurozone. The common currency remains soft against dollar, sterling and in particular the swissy.
EUR/CHF dived below 1.5 handle for the first time since March and reached as low as 1.4905 earlier today. After cutting Greece's Sovereign rating earlier this week, S&P also cut long term credit ratings fro Greek banks EFG Eurobank Ergasias and Alpha Bank AE by one level to BBB, and put those ratings on creditwatch negative. The news intensified concern on credit woes in the Eurozone and drove funds from Euro to Swissy.
Yen also reversed earlier gains as BoJ hinted expansion of quantitative easing. BoJ left rates unchanged at 0.1% as widely expected. The bank reviewed its midterm price stability target and said that it will not tolerate CPI at zero or below as it sees CPI growth of around 1% as its understanding of price stability. The statement triggered speculations that BoJ is still on the road to further quantitative easing and will keep rates low for a prolonged period of time.
Other data released today saw German PPI rose 0.1% mom, dropped -5.9% yoy in November. Eurozone current account deficit narrowed less than expected to EUR -4.6b in October. Trade surplus widened to EUR 6.3b in October. UK public sector net borrowing rose less than expected to GBP 23.0b in November. M4 money supply was flat mom in November. Canadian wholesale sales rose 0.3% mom in October.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4249; (P) 1.4392; (R1) 1.4480;
Intraday bias in EUR/USD is still on the downside with 1.4424 minor resistance intact. Current fall from 1.5143 is still expected to continue to next target of 38.2% retracement of 1.2329 to 1.5143 at 1.4068. On the upside, above 1.4424 minor resistance will turn intraday bias neutral and bring recovery. But consolidation should be relatively brief as long as 1.4589 resistance holds and recent fall should resume sooner rather than later.
In the bigger picture, current development indicates that EUR/USD should have topped out in medium term at 1.5143 already. We're talking about bearish divergence conditions in daily MACD and RSI and a break of 1.4626 support. Also, EUR/USD is sustaining below 55 days EMA with daily MACD turned negative too while weekly MACD has also crossed below signal line. Beside, the three wave consolidation pattern that started from 1.2329 should have finished too. Next focus is 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will further confirm the bearish case and argue that whole medium term fall from 1.6039 is likely resuming for a new low below 1.2329. On the upside, above 1.5143 is needed to invalidate this view. Otherwise, outlook will now remain bearish.
Economic Indicators Update
|04:15||JPY||BoJ Interest Rate Decision||0.10%||0.10%||0.10%|
|07:00||EUR||German PPI M/M Nov||0.10%||0.20%||0.00%|
|07:00||EUR||German PPI Y/Y Nov||-5.90%||-5.90%||-7.60%|
|09:00||EUR||German IFO - Expectations Dec||99.1||99||98.9|
|09:00||EUR||German IFO - Business Climate Dec||94.7||94.5||93.9|
|09:00||EUR||German IFO - Current Assessment Dec||90.5||90||89.1|
|09:00||EUR||Eurozone Current Account (EUR) Oct||-4.6B||-2.3B||-5.4B||-5.0B|
|09:30||GBP||Public Sector Net Borrowing (GBP) Nov||20.3B||23.0B||11.4B||10.2B|
|09:30||GBP||M4 Money Supply M/M Nov P||0.00%||0.60%||1.60%||1.70%|
|09:30||GBP||M4 Money Supply Y/Y Nov P||9.20%||10.00%||10.80%|
|10:00||EUR||Trade Balance (EUR) Oct||6.3B||5.7B||6.8B||4.3B|
|13:30||CAD||Wholesale Sales M/M Oct||0.30%||0.10%||0.20%|