Unraveling the Economic Web: European Data's Yucky Tale
European Data: A Missed Symphony
The European data presented a disheartening picture. EUR German Final GDP q/q came in at 0.1% instead of the forecasted 0.2%, following a previous reading of 0.2%. GBP Retail Sales m/m missed with an actual of -0.7% against the forecast of -0.3% and a previous of 0.1%. In the manufacturing and services sectors, EUR French Flash Manufacturing PMI was at 43.2 instead of 44.6, with a previous of 44.5. EUR French Flash Services PMI was 45.7 compared to the forecast of 49.1 and a previous of 49.2. EUR German Flash Manufacturing PMI was 43.2 versus the forecast of 43.1 and a previous of 43.0. EUR German Flash Services PMI was 49.4 against the forecast of 51.6 and a previous of 51.6. EUR Flash Manufacturing PMI was 45.2 instead of 46.0, and EUR Flash Services PMI was 49.2 compared to the forecast of 51.6 and a previous of 51.6. GBP Flash Manufacturing PMI was 48.6 instead of 50.0, and GBP Flash Services PMI was 50.0 against the forecast of 51.9 and a previous of 52.0. This data deluge pushed the EUR and GBP lower, with the CHF also following suit in sympathy. The USDJPY saw the JPY move lower initially but then returned to unchanged. For the commodity currencies, they too weakened against the USD.
SNB Chairman Martin Schlegel emphasized the significance of Switzerland maintaining a flexible inflation target. This has enabled the central bank to respond effectively to economic shocks. He highlighted the policy rate and foreign exchange interventions as the primary tools. Schlegel noted that the global economic slowdown has had a more pronounced impact on Switzerland due to the franc's appreciation, acknowledging its role as a safe-haven currency. He reaffirmed the SNB's commitment to ensuring price stability in the face of these challenges.
Next Week's RBNZ Meeting and Market Impact
Next week, the RBNZ will hold its meeting. A Reuters poll released yesterday suggests a 50 bp cut from the current 4.75% to 4.25%. This potential move could have significant implications for the market.
Yields and Their Movements
In Europe and the US, yields started the day on a lower note. German yields dropped by 8.4 bps, UK yields by 4.9 bps, French yields by 9.0 bps, Spanish yields by 9.1 bps, and Italian yields by 6.8 bps. In the US, 2-year yields fell by 2.3 bps, 5-year yields by 3.6 bps, 10-year yields by 4.2 bps, and 30-year yields by 4.1 bps.
Stock Market Performance
Stocks in Europe were mixed. The German Dax rose by 0.34%, the France's CAC by 0.10%, and the UK FTSE 100 by 0.93%. In the US, futures were implying mixed levels. The Dow was up 27.35 points, having risen 461 points or 1.06% yesterday. The S&P was down 3.71 points, having risen 31.60 points or 0.53% yesterday. The Nasdaq was down 28.75 points, having risen 6.28 points or 0.03% yesterday. For the week, going into the last day of trading, the Dow was up 0.98%, the S&P was up 1.33%, and the Nasdaq was up 1.56%.
Other Markets and Their Movements
In other markets, crude oil was -$0.78 at $69.36. Gold was up $28.83 or 1.07% at $2698. Bitcoin reached a new high at $99,500, just short of $100K. The current price is trading at $98,500, with the low today reaching $97,956.
Today, Canada retail sales (Est +0.4% and ex-auto +0.5%) will be released at 8:30 along with Canada New Housing prices (last 0.0%). Later at 9:45 AM ET, the US S&P Global PMI flash data will be released. Manufacturing is expected at 48.8 vs 47.8 last month, and Services is estimated at 55.2 vs 55.3 last month. The University of Michigan Final for November is expected at 73.7 vs 73.0 preliminary and 70.5 last month, with 1-year inflation at 2.6% and 5-year inflation at 3.1%.
Technical Analysis of Major Currency Pairs
Looking at the technicals for some of the major currency pairs going into the day, the EURUSD fell on the data and breached the 50% of the trading range since the 2022 low (to the 2023 high), which comes in at 1.04053. On the daily chart, going back to 2022 swing lows and highs from May, June, and August, the area was between 1.03485 and 1.03678. The selling continued until reaching 1.0332. Since then, the price has bounced higher to 1.04368. The 38.2% of the move down from the high this week is at 1.04372. Staying below this retracement indicates a plain-vanilla correction. A move above could give the buyers a glimmer of hope. Absent that, the buyers are losing. The 50% of the range since 2022 (not shown) at 1.0405 is where the US session began. A move below with momentum could give the sellers more confidence to push back toward the lows. Staying above, and a battle between 38.2% on the hourly and 50% on the daily is likely.
The USDJPY is closely observing the European market action. Looking at the hourly chart, the low for the day in the Asian session stalled at the 100 bar MA on the 4-hour chart (blue line currently at 153.933). The subsequent move higher saw the price get above the 100-hour MA at 154.719 but found willing sellers at the 200-hour MA at 154.946. The price at 154.53 is in the middle of the support and resistance targets.
The GBPUSD fell below the 50% on the daily chart yesterday at 1.26147 and continued its downward momentum today. The price fell on the data and through a trend line on the daily at 1.2497. The low reached 1.2487 before bouncing back higher. The current price is at 1.2512. Today, we expect more momentum below the support near the natural support at 1.2500 and the trend line at 1.2497. The first break failed. Will a second break occur? Looking at the 4-hour chart of GBPUSD, it will take a move back above 1.2596 to 1.26137 to counter the bearish bias in the pair. Sellers are firmly in control of the GBPUSD below that old floor area (now a ceiling).
Will the USD PMI also be yucky today and reverse the USD's higher move seen so far? The market awaits with bated breath.