23 September, 2015
I stated in yesterday’s report that EURUSD should move further into support and closer to the 50 day SMA before it can attempt a turnaround. This is indeed what happened: this morning price hit the 50 day SMA and the Bollinger Bands. Apart from trading at Bollinger and SMA support the pair is at levels that turned it higher from on 4th September. However, the latest weekly pivot candle low is at 1.1214, which is relatively near to the current trading levels. This implies that any rally from the current levels might be short lived and therefore probably doesn’t encourage buyers to buy the EURUSD today. Draqhi speech (1pm GMT today) is not expected to contain specific measures but is still expected to have a dovish tune. I therefore expect that the pair will test the 1.1017 – 1.1087 support range today.
French PMIs unexpectedly improve, with the manufacturing reading rising above the 50-point no change mark to 50.4 from 48.3 in the previous month. The services reading rose to 51.2 from 50.6. It seems the French economy is finally back in expansion territory, although readings have been volatile and while there may be a cyclical recovery, helped by the stabilisation elsewhere in the Eurozone, France’s underlying problems remain largely unaddressed, which heralds further weakness ahead.
Eurozone composite PMI fell to 54.0 in September from 54.3 in the previous month. The manufacturing reading dropped to 52.0 from 52.3 and the services to 54.0 from 54.0. Readings are broadly in line with our forecast, but slightly below consensus. The overall numbers remain firmly above the 50 point mark, thus pointing to ongoing robust expansion across both sectors and in the overall economy, while the country breakdown showed France finally catching up and thus a more balanced picture. Growth may not be accelerating, but at least so far it is still consolidating, even as clouds gather on the horizon.
German PMIs decline, but remain at healthy levels. In contrast to the French PMI readings, the German numbers corrected more than anticipated, with the manufacturing reading falling to 52.5 from 53.3 and the services number dropping to 54.3 from 54.9. Despite the correction, the numbers still point to robust expansion in both sector and continue to look healthy compared to France. Domestic demand in particular is boosting the German recovery, with low unemployment and inflation leading to very strong gains in real disposable income. However, this is not really sustainable growth in the medium to long term and investment remains an issue, as is the slowdown in emerging market economies, which is hitting German exports. The emission scandal meanwhile is a further negative for automakers going ahead.
Currency Movers Charts
I highlighted in the September 18th report that AUDUSD was trading at a resistance and formed a daily shooting star candle. Those that traded accordingly have since enjoyed a great short trade. Today AUD is down against all the other major currencies as well. EURAUD formed a narrow bodied pin bar yesterday and has been rising higher today. GBPAUD has continued its turnaround and has moved to 2.1840 resistance that has now caused a reaction lower. AUDJPY has also been moving down after I highlighted it in my yesterday’s report. AUDCAD has been falling in line with the other AUD pairs but the fall has been helped by the Crude rising today almost by 0.90%.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
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