EUR and GBP need drivers for growth | 22 November 2013

Review of the past week

The past week, quotes of Eur/Usd, Gpb/Usd and Jpy/Usd pairs grew.

We will traditionally start from the review of Eur/Usd. Core event of the week for the united European currency was GDP report for the 3rd quarter published on Thursday, 14th of November. As we expected, the data was just little worse than forecasts, on the point of 0.1% per quarter. GDP reports for the 3rd quarter were also published for the leading economies of Euro zone: German, French and Italian. All countries showed decline against the 2nd quarter, in particular, Italian data stands out. GDP of this country gives negative data for as long as 9 months in succession! On the background of such negative data, Euro weakened down to the point of 1.3418. However, weak data on the trade balance and industry output of the US let Eur/Usd quotes grow to the 35 figure and trade week closed at the point of 1.3495. 

The speech of the future FRS Chief Janet Yellen in the Senate Banking Committee also must be mentioned, where she told that now it is not the time to curtail QE3 and it is required to wait until the economy steps into the phase of sustainable development. This factor added to growth of the European currency.

Over the past trading week, the British Pound was at risk, further to release of weak inflation data. Consumer Price Index dropped down to 2.2%. The last time such weak data was received in September, 2012. On this background, quotes declined to the point of 1.5853. However, the next day the pair started a confident upward movement. As we mentioned in our previous week review, British currency demonstrated its strength. On Wednesday, 13th of November, Bank of England presented its quarter report on inflation. It raised forecast on growth of the UK economy and it the possibility of the interest rate increase in the end of 2014 under reach of target level of unemployment was also stated.

Investors reacted positively and started active openings of long positions on Gpb/Usd. Trade week closed at the point of 1.6119, near to strong resistance level.

Participants of trades with Jpy/Usd  managed to reach the point of 100.00. Over the last two weeks, bears actively resisted, but bulls overwhelmed at last. Japanese GDP for the third quarter showed decline, but is above expectations. Japanese currency neglected this report and investors focused on Janet Yellen's speech in the Senate Banking Committee. Future FRS chief stated that it is necessary to remain current monetary policy unchanged within near months, which encouraged bulls to open long positions. Growth of Nikkei 225 stock index over the entire week also added to optimism of bulls and Jpy/Usd closed the week at the point of 100.19.

Forecast for 18 – 22 November:

Eur/Usd: this week will be eventful in terms of European statistics. On the first trading day of the week, September data on trade balance and balance of payments will be released. Expert interviewed by Bloomberg expect a moderate growth of positive balance of both figures. GDP report for the 3rd quarter and service PMI show that data must correspond to forecasts.

On Tuesday, anticipating figure will be published – ZEW Economic Sentiment Index for November. Sustainable ascending trend has formed for this figure from August, 2012. The data above expectations will support Eur/Usd quotes.

On the last trading day of the week, the IFO Business Climate Index will be released. Forecasts esteem it to be on the level of 107.9. If forecast is justified, that will be the highest value for the last 1,5 year. Growth of this index plays a positive role for the quotes of the European currency.

Important day for the US currency is Wednesday, 20th of November. First, FRS Chief Ben Bernanke will have a speech at the National Economists' Club of Washington. Participants of the market are still concerned by the time, when FRS starts to cut QE3. Commenting on this topic can lead to movements on the currency market. Further, Consumer Price Index and the report on retail sales for October will be released. Since in October unemployment grew by 0.1% to the point of 7.3% and Consumer Confidence Index declined by 9 points for the similar period, we can expect inflation report to correspond to forecasts either worse. Weak data will be of no doubt negative for the US currency. The day will be closed by records of the last FRS meeting.

Following levels may be underlined for Eur/Usd for this week:

Support levels: 1.3450- 1.3390- 1.3295

Resistance levels: 1.3500-1.3565-1.3645.

Gpb/Usd: Publication of the last BoE meeting's records  on Wednesday, 20th of November, can be highlighted. Market participants are not expecting surprises in the respect of monetary policy. In its quarter report on inflation, BoE lets market players understand that the interest rate will only be raised upon reaching of unemployment level as of 7% (now it is 7.6%). To continute positive trend, Gpb/Usd pair must consolidate above 1.6133.

Following levels may be underlined for Gpb/Usd for this week:

Support levels: 1.6119- 1.6010-1.5900

Resistance levels: 16165-1.6250-1.6310.

Jpy/Usd: On Thursday,  21st of November, the meeting of the Japanese Central Bank will take place. Participants of trades with Jpy/Usd do not expect adjustments of the monetary policy and therefore, a weak market reaction can be predicted. Positive mindset of stock investors may encourage bulls to test 101.50. However, if Wednesday report from the USA is weak, we can expect growth of the Japanese currency.

Following levels may be underlined for Jpy/Usd for this week:

Support levels: 100.00- 99.40-98.50

Resistance levels: 100.60 -100.90 – 101.50.