EURUSD, Daily               

The euro eked out a fresh low versus the dollar while yen edged out a new low as most stock markets in Asia picked up the risk-on vibe imparted by the ECB’s announcement of a net increase in stimulus. EURUSD posted a four-day low at 1.0589 in Asian trade before settling to a narrow range in the low 1.06s. USDJPY logged a four-session peat at 114.56, nearing the 114.82 10-month peak seen on November 30. Yen crosses were also firmer today, pointing to a generally soft tone in the Japanese currency. Elsewhere, USDCAD consolidated above the two-month high of yesterday, despite a second day of gains in oil prices. AUDUSD oscillated around 0.7450, holding well within yesterday’s range.  European Stock markets, which rallied in the wake of the ECB announcement yesterday, are mixed, with the DAX down -0.11%, against a gain of 0.11% in the French CAC 40 and a rise of 0.13% in the FTSE 100. Eurozone peripherals, which outperformed yesterday, are underperforming and the Italian MIB is down nearly 1%.

The EURUSD closed significantly below the key 20 DMA last night and a SHORT position was opened at 1.0620.There could be some consolidation around this key level, as the Parabolic SAR remains positive and the Bollinger bands are compressing.  Target 1 is 1.0550 and then a retest of recent low at 1.0503 and Target 2 1.0500.Thereafter, next support appears at 1.0160, parity 1.000 and 0.9880.  The MACD, RSI and OBV are all suggesting more weakness ahead.

Janne Muta

Chief Market Analyst

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EURUSD, Daily               

ECB disappoints with QE tapering. The ECB left rates unchanged, but while the QE program was extended, monthly asset purchases were cut to EUR 60 bln from EUR 80 bln. The central bank said in the initial statement that QE will be increased if the outlook turns less favourable, but that wasn’t enough to prevent a sharp drop in Bund futures, which already declined going into the announcement and are now down 132 ticks on the day, while the cash yield is up 9.3 bp and spreads widen sharply, with the Italian 10-year up 15.2 bp, the Spanish up 13.4 bp and the Portugeuse 10 bp.  ECB settles for less monthly QE for longer, in what looks like a typical European compromise. Monthly purchase volumes were cut back, but instead of the 6 months QE extension markets had been looking for the ECB committed to a 9 months extension and also reserved the right to increase monthly purchases if the overall situation changes. And with officials previously stressing that there will be no abrupt end to monthly purchases, this means the ECB will remain in the market for the foreseeable future and the balance sheet will continue to expand with today’s package amounting to at least half a trillion Euros in additional stimulus. So still much for markets to cheer, even if the initial reaction clearly shows disappointment Draghi will hope that things settle down quickly, when the details start to sink in.

EURUSD which had broken 1.0800 earlier falls 50 pts to 1.0750, the ECB press conference up next will be more interesting than usual.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, Daily                

German Oct Ifo index stronger than expected at 110.5, up from 109.5 in the previous month. The better than expected number ties in with the strong PMI readings for Germany yesterday and the fact that the expectations index jumped to 106.1 from 104.5 and against expectations of a marginal rise to 104.6 is particularly encouraging. The German recovery at least remains intact and even though the French national business confidence numbers earlier came in weaker than hoped, the readings at company level were not that bad, so it still seems the overall Eurozone recovery continues as planned, despite the Brexit scenario adding uncertainty and despite the fact that the weaker Pound has lifted comparative competitive measures in favour of the U.K.. German Ifo diffusion index rose to 13.8 from 11.9 in the previous month, with the manufacturing reading improving to 16.7 from 13.3 and construction confidence rising to 10.2 from 9.3. Confidence in wholesale and retail trade meanwhile remains in positive territory, but fell back somewhat from September. Overall though, the improvement to the highest reading since 2014 in the Ifo and the fact that optimists outnumber pessimists across all sectors shows that the recovery is broadly based and remains intact.

EURUSD ticked up to day highs at 1.0892 and EURGBP touched 0.8908. US consumer confidence, the Case-Shiller US home price index and speeches from Governor Carney and President Draghi still to come later today.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, H4              

U.S. August retail sales fell 0.3%, while ex-autos slid 0.1%. The unchanged reading in July was bumped up to 0.1% but June’s 0.8% was nudged down to 0.7%, for a wash. The 0.3% drop for the July ex-auto figure was revised lower to -0.4%, the 0.9% June figure revised to 0.8%. Sales excluding autos, gas, and building materials was flat from -0.1%. Motor vehicles and parts sales declined 0.9% after a 1.7% July jump (revised from 1.1%). Gas station sales fell 0.8%. Building materials dropped 1.4%, while furniture declined 0.7%. Miscellaneous sales crashed 2.4%. Health and personal care dipped 0.1%. Sporting goods slid another 1.4%. Non-store retailers saw a 0.3% slide. Electronics inched up 0.1%.

Today’s U.S. sentiment reports were weaker than expected, thanks to component weakness underlying the divergent headline moves. We saw a Philly Fed pop to a 19-month high of 12.8 in September from 2.0 in August and -2.9 in July that left a big rise from the 3-year low of -10.2 last December. Yet, component weakness after an already-weak August performance left an ISM-adjusted drop to 44.9 from 47.2 in August and 51.3 in July, hence leaving only a modest rise from the 44.1 expansion-low in April. The Empire State headline rose to -1.99 after falling to -4.21 in August from 0.55 in July and 6.01 in June, but the component data for that report were also weak, and the ISM-adjusted measure fell to an 8-month low of 45.1 from 50.2 in August, 48.8 in July and 50.0 in June. We saw expansion-lows in January of -19.37 for the headline and 43.4 for the ISM-adjusted measure. For later month-surveys, we expect a Richmond Fed rise to -2.0 from -11.0, a Dallas Fed bounce to -2.0 from -6.2, a Chicago PMI rise to 53.5 from 51.4, an ISM rise to 50.0 from 49.4, and an ISM-NMI rise to 53.5 from 51.4, versus a 53.1 two-year low in May. The mix should allow the ISM-adjusted average of the major surveys to fall to the 49 expansion-low seen in January and February and previously in October of 2012, from the 50 average in August, and previously in May and June. We saw a 12-month high of 52 in July that was also seen in March.

Fed funds futures are higher on the back of rather tepid data that further reduced the odds for a Fed tightening next week. The data-dependent FOMC will be hard pressed to make a credible case for a hike given the weakness in August retail sales and industrial production, as well as the poor September sentiment reports (and especially in the component readings) and the subdued inflation readings. With the Fed’s policy decision less than a week away, implied rates are suggesting only about an 18% chance for a rate increase. The probability had risen to over 60% after the hawkish tilt from Fed Chair Yellen and especially VC Fischer back in August at the Jackson Hole central banker meeting, and following a less than dovish ECB stance last Thursday. The recent market volatility can’t give the FOMC much footing either. We’ve thought the December13, 14 FOMC was the better bet all along due to the potential instability from the October 14 money market reform deadline, and the November 8 elections.

EURUSD tracks sideways between 1.1250 – 1.1215, Cable trades both sides of 1.3200 and USDJPY ticks higher to 102.60.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, Daily              

Eurozone Aug HICP inflation  –  0.2% y/y, slightly lower than the initially expected rise to 0.3% y/y, but not a surprise after the unexpected drop in the German headline rate yesterday and the steady French number earlier today. Core inflation unexpectedly fell back to 0.8% y/y from 0.9% y/y. Eurozone inflation still is very slowly trending higher, but remains at very low levels, even when taking out the impact of oil prices.

Eurozone July unemployment held steady at 10.1%, against expectations for a slight dip in the headline number to 10.0%. With back revisions the headline rate has remained steady for a while now and is only gradually trending lower, with national rates still showing a wide variations and ranging from just 3.9% in Malta to nearly 20% in Spain (Greece hasn’t released data for June or July yet, but is likely to top the list with a jobless rate of clearly over 20%) Spanish jobless numbers are coming down, however, which is encouraging, although the very high youth unemployment rate in the Eurozone of 21.1% remains a pressing issues for politicians in particular, as it not only reflects modest growth, but also the need for further labour market reforms.

So while the numbers by themselves don’t necessarily call for a further relaxation of the ECB’s very accommodative policy stance, they still give Draghi room to manoeuvre. For now though it seems the ECB is more concerned with trying to distance itself from the Fed’s focus on another rate hike this year then advocating further easing for the Eurozone.

EURUSD eased further, as the USD strengthened,  posting three week lows at 1.1130.  Next support is at the 200 DMA 1.1115 and then 1.1075.  The 4 hour chart is also bearish with a break of the 200 MA and support at 1.1135 being tested.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.