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USD, EUR/USD, USD/JPY, GBP/USD

GBP/USD: pound is resisting the pressure

British pound was trying to resist the general USD strength. GBP bulls were supported by the decline in EUR/GBP. However, GBP/USD failed to show growth.

On the one hand, the news flow from the UK was mostly positive. UK November PMIs showed mostly a positive outcome, while the British government has revised 2014-2015 economic growth forecasts to the upside. Finance Minister George Osborne said in his autumn statement that the economic growth has become more balanced and pointed out that Britain is now leading in growth rates among the biggest advance economies. The Bank of England has left monetary policy unchanged.

On the other hand, news from the US was even more positive. The market expects America to raise rates sooner than the UK and this will continue keeping GBP/USD under pressure.

Next week Britain’s economic calendar is not very busy: pay attention to the UK manufacturing production data on Tuesday and trade balance on Wednesday. All events which will have critical importance for GBP/USD will take place in a week. Watch the release of the Bank of England’s meeting minutes and the Federal Reserve’s meeting on Dec. 17.

The pair’s still trading below the resistance line of the downtrend since July highs. For now this line is providing resistance in the 1.5800 area. The space to trade in the sideways range remains. However, a fix below 1.5600 will open the way down to 1.5400 and lower.

USD/JPY: where’s the upside limit?

By Elizaveta Belugina

During the past week the buyers managed to push USD/JPY to the psychologically important level of 120 yen. Positive expectations about the US economy were the main driver for this pair, and the bulls have decisively put aside the news that Japan’s credit rating got lowered by Moody’s.

We now have to look further and further away into the past in order to determine support & resistance levels. On the upside the next important levels are located at 121.37 (Dec. 2005 high), 122.00 and 124.14 (2007 high). Support is located in the 119.40/88 area (Feb. and Oct. 2006 highs, 61.8% Fibo of the decline from the 1998 peak), 119.00 and 117.30.

The next week will be the last ahead of the Japanese parliamentary elections which will take place on Sunday, Dec. 14. Pay attention to the release of the revised Japanese Q3 data which is due early on Monday – this release may influence the mood of the Japanese voters. For now Abe’s party is far ahead of its rivals in the opinion polls. According to the expectations, it will manage to keep two thirds of the seats in the lower house of Parliament – for now this is the main scenario and this scenario is certainly positive for USD/JPY.

As a result, we can expect USD/JPY to continue growth, though less fast than in the recent weeks. The overbought nature of the pair is unlikely to construct a big obstacle for the bulls, but Japanese officials may try to slow down yen’s depreciations with their comments. According to Bloomberg, corporate bankruptcies in Japan due to the weak yen jumped last month to the most since January 2013. In addition, many large players would probably like to take profit. At the same time, we think that big corrections down are unlikely and that USD/JPY has chance to test the 124 handle.

EUR/USD: what will the new week bring?

Kira Iukhtenko

As we expected, the ECB left monetary policy unchanged in December, delivering no full-scale QE. However, a chance for more stimulus to come in early 2015 remains very high. The central bank has substantially lowered euro zone’s growth and inflation forecasts. That confirms the current measures are not enough to support the troubled economy.

On Thursday, December 11, ECB will hold the second TLTRO auction, offering cheap loans to the euro zone’s banks. Demand on the first auction was disappointingly weak. This time banks are expected to borrow around 150 billion euros – still far below 400 offered. Failure of the TLTRO program will confirm the need for more aggressive stimulus. As a result, expectations for QE will rocket, pulling the euro to new lows in the coming weeks.

Except for the loan auction, economic calendar for the coming week is rather light. Eurogroup meets on Monday, while ECOFIN – on Tuesday. On Friday euro zone will release October industrial production figures.

Let’s conclude our analysis with the EUR/USD weekly chart. Last week the pair attempted to recover, but met resistance at 1.2450. We stay bearish and recommend selling euro on rallies. Important levels to watch - 1.2200 and 1.2040.

US Dollar on the rise again

Kira Iukhtenko

Fresh economic data confirm: US economic recovery remains sustainable. November PMI indices came above the forecasts, while the Nonfarm payrolls blew the market up. US private sector added 320K new jobs in November versus 230K expected. Average hourly earnings are also on the rise.

Upbeat news increase expectations for an earlier Federal Reserve rate hike and support demand for the US dollar. Euro, Australian dollar and the Yen plummeted to the new multi-month lows. As we know, these are the central banks that are expected to add monetary stimulus in the year 2015.

Economic calendar for the coming week is light. You should pay attention to the US retail sales data on Thursday. On Friday watch the producer price index and consumer sentiment index by the Michigan University.

Friday, 05 Dec, 2014 / 3:49

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