The intrigue on Euro is now resolved | 01 November 2013

Review of the recent week

The recent week was certainly very interesting in terms of the Forex market. USA performed as major news maker. Traders and investors wondered if Eur/Usd pair would be able to reach a fresh High 2013. On Tuesday, 22th of October, this intrigue was resolved: due to weak data on Non-Farm payrolls there was an abrupt upsurge in EUR/USD quotes. Year High was updated and Eur rate gravitated towards the figure 38.

Weak macroeconomic data from Eurozone did not support European currency. In leading economy of the region – Germany – PMI and IFO business climate index data was released. Both figures were below the forecast and affected EUR/USD quotes. The maximum efforts taken by bulls is to hold position a little above the level of 1.38.

The data on British pound published the last week fully corresponded to forecasts. For example, on Wednesday recordings of the last BoE meeting on monetary policy were published. There were no surprises and all announced figures were within the frames of expectations. On the last trading day of the week, GDP data for 3rd quarter was published. Growth of this figure amounts to 0.8% per quarter, which is the highest value for the last two years. Nevertheless, market participants expected these very figures to be released and the principle worked out “buy rumors – sell facts”. The value dropped for a half of figure, down to the point as of 1.6149. 

The last week's inflation data is to be emphasized when it comes to the economy of the land of the rising sun. The first time from November of 2008, Consumer Productivity Index demonstrated growth above 1% per year. Value of the figure amounts to 1.1%. Further to release of such positive data, Japanese national currency started to attack 97.0 level. Ignition was not long though and Japanese “exporters” raised quotes up to the point of 97.48.

Forecast for the week October, 28 – November, 1

New business week is eventful in terms of macroeconomic news. Core event is the FRS meeting of the USA on October, 30. Ben Bernanke and his colleagues are not expected to give surprises on this time. Market participants look up to remaining price, cause monetary policy is unlikely to be changed. Besides, recent weak data on the labor market in the USA add more certainty that the course of expansionary measures will remain the same. Also reports on inflation and retail sales have to be taken into consideration. On the first day of November, productivity index ISM will be published that can affect major quotes if to take into account its release date – Allhollows Day in Europe (and therefore, low liquidity market).

The week is not as eventful for the united European currency. Unemployment report for Germany can be emphasized in the row of events. Since Germany is the driving force for Eurozone, good data will support Euro. If FRS does not allow any surprises, the path to 1.40 will be open for Euro.

Following levels for Eur/Usd pair can be specified for the coming week:

Support levels: 1.3710-1.3645-1.3470

Resistance levels: 1.3830-1.40.

In the last October days, release of statistics from Great Britain is not scheduled. On the last business day of the week, October PMI for production industry will be published. Experts interviewed by Bloomberg expect drop of this indicator. The index can demonstrate growth to Highs of the last two years, but because of the holiday time in Great Britain, market activity on the pair will be low. The pound will be traded within the range 1.6060-1.63. Strong driving factors are required to leave this range, but now these factors are not seen.

Following levels for GBP/USD pair can be specified for the coming week:

Support levels: 1.6060-1.5910

Resistance levels: 1.6250-16310-1.64.

The Central Bank of Japan holds its meeting on the last day of October too. Press-conference of its management sparks a great interest of market players. Investors do not expect changes in monetary policy, therefore, one should not be surprised with absence of strong changes in quotes of USD/JPY following this event. Entire attention of USD/JPY traders will be riveted to news from the USA. In case the data on the US currency is negative, Yen has all chances to grow to the point 95.90. Serious fundamental factors are required for continuation of growth.

Following levels for USD/JPY pair can be specified for the coming week:

Support levels: 96.95-95.90-95.00

Resistance levels: 97.60-98.50-99.10