• EUR/USD has been under heavy selling pressure throughout the all week.
  • Bears are likely eyeing the 1.1000 handle on the way down.

EUR/USD daily chart

The Euro, on the daily chart, is trading in a bear trend below its main daily simple moving averages (DMAs). The Fiber is registering its worst weekly decline since late August 2019.

EUR/USD four-hour chart

The Fiber is trading below its main SMAs on the four-hour chart suggesting a bearish bias in the medium term. Bears broke below the 1.1028 support level which is opening the way to further potential weakness towards the 1.1000 figure and to the 1.0965 price level steam, according to the Technical Confluences Indicator.

EUR/USD 30-minute chart

EUR/USD is under pressure below the main SMAs, suggesting a bearish bias in the near term. The 1.1028 and 1.1051 levels should act as resistance as well as the 1.1063/74 resistance zone, according to the Technical Confluences Indicator.

Additional key levels

  • DXY is up for the fifth consecutive day and closed Friday above the 98.30 level and the 50 DMA.
  • Resistances are located at the 98.65 and 99.26 price levels.

DXY daily chart

DXY (US Dollar Index) is trading in an uptrend above its main daily simple moving average (DMAs). This Friday the Greenback broke above the 98.30 level and the 50 DMA, trading at its highest in 18 trading sessions.

DXY 4-hour chart

DXY is trading above its main SMAs after bouncing from the double bottom at the start of November. The market ended Friday above the 98.30 level opening the doors to the 98.65 and the 99.26 resistances on the way up.

DXY 30-minute chart

DXY is trading above the main SMAs, suggesting bullish momentum in the short term. Support is seen at the 98.30, 98.00 and 97.80 price levels.

Additional key levels

US dollar strength has repeatedly confounded market expectations since early last year and there are reasons to suspect that this may continue for a while according to analysts at Rabobank. They expect China/US trade tensions to re-emerge, which could lead to renewed USD support.

Key Quotes:

“The fact that USD strength has repeatedly confounded market expectations since early last year begs the question as to whether the factors that are underpinning the USD have undergone an adjustment in recent years. We argue that there have been changes in the market dynamics behind the USD. Consequently, we would suggest that there is a strong chance that USD strength is likely to continue perplexing the market at least over the next year or so.”

“We fully expect tensions between the US and China to return next year and for this to weigh on risk appetite and support the USD. While any relief following a phase 1 trade deal may lend support to EUR/USD in the weeks ahead, we expect EUR/USD to trend lower to the 1.08 area on a 6 month view on renewed trade tensions and fears of slowing world growth.”

“Given our expectations of a US recession in H2 2020 and the likelihood of an aggressive pace of Fed easing next year, we do expect EUR/USD to recover some ground on a 12 month view. However, we expect Fed rate cuts only to dampen the USD’s shine and see EUR/USD around 1.12 on a 12 month view.”

Next week, the Reserve Bank of New Zealand will have its monetary policy meeting. Market consensus sees a 25bps rate cut. According to analysts at Wells Fargo it will be relevant to watch what the RBNZ signals about the future.

Key Quotes:

“The Reserve Bank of New Zealand held its official Cash Rate at 1.00% at its last monetary policy meeting, following its moreaggressive-than-expected 50 bps rate cut in August. In the accompanying statement the central bank noted that there remains further scope for additional stimulus, if necessary. Meanwhile, RBNZ Governor Orr said the central bank was pleased with the outcome of its August easing to date and that it was unlikely to need “unconventional” monetary policy tools.”

“Given that activity data and confidence surveys have remained subdued, markets are leaning toward a November rate cut, with markets currently implying around a two-thirds chance of a rate cut at next week’s meeting. That said, even if the central bank opts to leave rates on hold next week, it will be important to watch whether the central bank signals further rate cuts ahead.”

Analysts at ING see the EUR/USD pair moving with a mildly bearish perspective for next week and see it trading in the 1.0990/1.1110 range.

Key Quotes:

“The EUR is performing pretty poorly, even though many asset classes are starting to price in a more positive trade environment. We think this FX performance represents the emergence of the EUR as a preferred funding currency on the view that interest rates in the eurozone will remain at rock bottom throughout 2020. Supporting this view should be German 3Q19 GDP data released on Thursday, which may well show a technical recession. Driving that weakness will be the industrial sector, and Eurozone IP data (Wednesday) should also tell the story of the manufacturing sector grinding to a halt. We doubt a modest uptick in the German ZEW survey (Tuesday) will provide much of a lift – instead, the November PMIs (released 22nd-25th) will be more significant.”

“In the US, the focus will remain on the trade story. The market would prefer having a date and a location (none exists at the moment) for a US-China trade deal and without that it may be reluctant to take risk assets (and Treasury yields) too much higher. This especially so because Chinese October activity data releases out later in the week should be soft. Unless US October retail sales (Friday) collapse, however, it looks like the recent benign conditions can continue; we're waiting for this year’s monetary stimulus to show up in better confidence numbers. Wednesday’s release of US October CPI figures – headline still at 1.7% YoY – are unlikely to mean much to a market more focused on activity right now. There’s also Fed Chair Powell’s address to Congress on Wednesday – though like other central banks the Fed looks to be in wait-and-see mode, pausing to see if their three rate cuts this year have curtailed the slow-down.”

Analysts at CIBC argue that the Pound is waiting for the next political move. They see don’t see a move significantly higher in GBP/USD during the current year.

Key Quotes:

“A few months ago, negative positioning against sterling suggested that a no-deal Brexit may, at that stage, have been the base case for currency traders. Recent developments, including a slide in the opinion polls for the Brexit Party, has led to a paring of those short positions and now the base case appears to be for an orderly exit by January 31st.”

“Next month’s election could still cause uncertainty and potential volatility for sterling, particularly if the conservative party gives up some of its recent lead in the polls. As such, we expect the next leg higher in GBPUSD to not happen until next year, assuming there’s some clarity on the UK’s relationship with the EU following the election and the new January 31st deadline.”

Analysts at MUFG Bank see the Reserve Bank of New Zealand (RBNZ) delivering one more rate cut this year rather than wait until February and expect the NZD to weaken versus the US dollar.

Key Quotes:

“The RBNZ has been successful in their attempts to weaken the NZD. The 75bps of rate cuts delivered this year have resulted in the NZD losing around 5% of its value against the USD and retesting the lows from the summer of 2015. The NZD has recently staged a modest relief rally driven by optimism over a US-China partial trade deal and the global growth outlook. However, we expect recent gains to prove short-lived.”

“The RBNZ is poised to clip the kiwi’s wings in the week ahead when we believe they will deliver another 25 basis point rate cut. At their last policy meeting, the RBNZ clearly signalled that there remains scope for more monetary stimulus if necessary. It has expressed concern over ongoing low inflation which remains below their 2% target mid-point, and slower growth during the 1H 2019.”

“We expect the NZD to weaken driven by another rate cut from the RBNZ. NZD/USD is currently testing key support from its 55-day moving average at 0.6346. A decisive break below could open up further downside back towards the October lows at just above the 0.6200-level.”

The Canadian employment report for October was released today and showed numbers below expectations. Matthieu Arseneau, analysts at the National Bank of Canada point outs the labour market took a breather but also noted it showed the strongest real wage increases since 2012.

Key Quotes:

“Canada’s employment was essentially flat in October (-1.8K) according to the Labour Force Survey, below consensus expectations calling for a 15K rise. That said, the jobless rate remained unchanged at 5.5% with the participation rate remaining also unchanged at 65.7%.”

“LFS employment report was below expectations for the first time in three months. A boon was expected by economists as the election occurred during the reference week but it turns out that the contribution from the government in October has been relatively low compared to past similar episodes. One should not be overly worried by the pullback observed in self-employed and the private sector last month (-32K combined). Those two categories taken together jumped by a massive 225K so far this year, the second best performance in the current expansion.”

“Total employment, meanwhile, is up a whopping 356K this year in Canada, still the highest since 2002, with no less than 79% of those jobs being full-time. Such a development definitely helped the housing sector to get back on its feet. Meanwhile, consumption should continue to have some support in the coming months as real wages have been running recently at their fastest clip since 2012.”

Analysts at MUFG Bank see more gains ahead of the US dollar as stronger economic data highlights that fears over a sharp slowdown in the United States and recent weakness are overdone.

Key Quotes:

“The USD is deriving support from the ongoing correction higher in US yields. The 10-year US Treasury yield is still rising back towards 2.00% where it was trading prior to the summer growth scare. The inversion of the US yield curve is reversing as the market participants scale back fears over a sharper US slowdown. Two of the most important US economic data releases; the latest NFP report and ISM nonmanufacturing survey both helped to ease growth concerns. We do not expect the upcoming releases of latest retail sales and CPI reports to trigger a reversal of USD strength.”

“Progress towards a US-China partial trade deal which removes the threat of further taxes on US consumers is supportive for higher US yields and a stronger USD. We expect Fed Chair Powell to strike a cautiously optimistic tone in his semi-annual testimony. Further cuts are not needed right now.”

“We expect the USD to strengthen further in the near-term. The dollar index has retraced less than half of October’s sell-off. Stronger US data combined with improving global investor risk sentiment favours further USD upside especially against the lower yielding G10 currencies. Stronger US economic data reinforces expectations that the Fed has “paused” their rate cut cycle and will encourage higher yields at the long end of the US curve. A decisive break above the end of October DXY highs at the 98.00-level wIll open up further gains back towards the 99.00- level. One risk to our bullish USD view is that Asian FX strength could spill over into broader USD weakness.”

Gold daily chart

The market is retracing down below the 50 and 100 DSMAs. A break below 1455.50 swing low could open the doors to further losses towards the 1400 handle.

Alternatively, if the buyers can support the market, Gold could revisit 1480 and the 1500 level. A break above the 1520/1555 resistance can lead to a resumption of the uptrend.

Additional key levels