USD Strengthens On Trade Hopes Once Again…

Nov 25 19, 10:29 GMT

The USD strengthened against the EUR and a number of other currencies, on Friday and during today’s Asian session, as hopes about a possible US-Sino partial trade deal arose once again. Headlines from China over the weekend, showed that the Chinese side is considering to improve protection of intellectual property rights, which could constitute a substantial progress point for the relationships between the US and China. It should also be noted that US officials stated over the weekend that a deal was possible by year’s end, also providing a boost in the market’s confidence. On the flip side, the elections in Hong Kong seem to provide a landslide victory to prodemocracy candidates, which could complicate the situation even further. Moves were not so substantial as market doubts and weariness of the headlines about U.S.-China trade negotiations, kept the markets on the cautious side. EUR/USD dropped on Friday breaking clearly the 1.1050 (R1) support line now turned to support. We maintain a bearish outlook for the pair, as it broke southwards the sideways movement of the past week. It should be noted that the RSI indicator in the 4-hour chart seems to confirm the dominance of the bears, however during the Asian session, testing the reading of 30 which could be implying an overcrowded short position. Should the bears maintain control over the pair’s direction, we could see the pair breaking the 1.1050 (S1) support line and aim for the 1.1000 (S2) support level. Should the bulls take over, we could see the pair breaking the 1.1105 (R1) resistance line and aim for the 1.1170 (R2) resistance level.

…while the pound weakens on soft data…

The pound weakened on soft data on Friday, which served as a painful reminder of the toll the UK economy pays for the prolonged Brexit period. The PMI indicators dived deeper below the cut-off point of 50.0 showing a contraction of economic activity for both the manufacturing and the services sectors in the UK for November. The pound seems currently, to be looking at election developments feeding the hope that he country could exit its current political paralysis. The Tory lead against Labour, in the election polls seems to be maintained, yet no majority for a functional government seems to be in sight. We could see the pound be driven by political developments this week especially in the absence of substantial financial releases. Cable dropped on Friday breaking the 1.2885 (R1) support line, now turned to resistance, yet at today’s Asian session opened wit ha positive gap. We expect the pair to maintain a sideways motion, between the 1.3015 (R2) and the 1.2760 (S1) support line. Should the pair come under the selling interest of the market, we could see cable, breaking the 1.2760 (S1) support line and aim for the 1.2640 (S2) support level. If the pair’s long positions are favored, we could see it breaking the 1.2885 (R1) line and aim for the 1.3015 (R2) level.

Other economic highlights today and early tomorrow

Today, we get Germany’s Ifo Business climate for November, UK’s CBI distributive trends for November, Canada’s wholesale trade for September and New Zealand’s retail sales for Q3.

As for the week ahead

On Tuesday, we get the US Consumer Confidence for November, the new home sales figure for October and New Zealand’s October’s trade data. On Wednesday, we get from the US the durable goods orders growth rates for October, the 2nd estimate of the GDP growth rate for Q3, the consumption rate, the core PCE price index growth rate and the Pending home sales change all for October. On Thursday, from Japan we get the retail sales growth rate for October and from Germany the preliminary HICP rate for November. On Friday, we get from Japan the industrial output growth rate for October. From France we get the CPI (EU Norm.) growth rate for November. From the Eurozone the HICP rate for November and the unemployment rate for Oct. In the American session we get Canada’s GDP growth rate for Q3 and September.

EUR/USD 4 Hour