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NOTICIAS

Analysts at ABN AMRO are expecting the ECB to keep interest rates on hold next year and expect the forward guidance on interest rates to change following further downgrades to the outlook.

Key Quotes

“We think that the central bank will signal that interest rates will be left on hold through 2019 by the June meeting. We expect a 10bp hike in all the policy rates in March 2020 and a second 10bp increase in September 2020 (with all policy rates moving in sync). We do not expect the ECB to end reinvestments until late in 2021. Finally, we expect a TLTRO extension to be announced in March 2019.”

 

   •  Resurgent USD demand prompts some fresh selling on Friday.
   •  Brexit uncertainties continue to dent sentiment around the GBP.
   •  Traders now eye US monthly retail sales data for some impetus. 

The GBP/USD pair extended its sharp intraday slide and is currently placed at the lower end of its daily trading range, just a few pips above mid-1.2500s.

After yesterday's failure ahead of the 1.2700 handle, the pair met with some aggressive supply and was being weighed down by a strong pickup in the US Dollar demand. In fact, the index that measures greenback strength jumped to 18-month tops, around mid-97.00s, and was seen as one of the key factors exerting fresh downward pressure. 

Moreover, the latest optimism over the UK PM May's victory in the leadership challenge on Wednesday might have already faded and concerns over May's ability to get her Brexit deal through the parliament now seemed to dent sentiment surrounding the British Pound.

As Mario Blascak, FXStreet's own European Chief Analyst explains, “the uncertainty over the future of the Brexit deal is still hanging in the air as the UK parliament schedule shows no Brexit deal vote before Christmas. This strategy is putting an increased pressure on lawmakers in the UK parliament to approve the Brexit deal negotiated by Theresa May in a last minute vote or risk a no-deal Brexit scenario.”

Meanwhile, possibilities of some short-term trading stops being triggered on a sustained breakthrough the 1.2610-1.2600 horizontal support might have further collaborated towards aggravating the selling pressure and accelerate the downfall.

It would now be interesting to see if the pair is able to attract any buying interest at lower levels or the ongoing slide marks the end of recent corrective bounce and the resumption of the prior/well-established bearish trend. 

Traders now look forward to the US economic docket, highlighting the release of monthly retail sales data, in order to grab some short-term opportunities on the last trading day of the week. 

Technical outlook

“Technically, the GBP/USD is still capped within a downward sloping trend with technical oscillators like Momentum and the Relative Strength Index both zig-zaging lower and Slow Stochastics about to maker a bullish crossover just above the oversold territory. The GBP/USD is still trapped in a downward sloping trend on a 1-hour chart with 1.2550 and 1.2500 being the next target” Blascak adds further.
 

Analysts at TD Securities expect the BoE’s MPC to leave policy on hold on Thursday.

Key Quotes

“The policy backdrop has deteriorated somewhat since their November meeting--in particular with regards to activity data and political uncertainty--so the MPC might come out with a slightly more cautious tone.”

FX: Our base-case expectation for a slightly more-cautious BoE suggests sterling's capacity to rally meaningfully into year-end is limited. With Brexit-related catalysts likely to wane until early-January, any marginal drivers that do emerge for the major GBP pairs are likely to rotate to the non-sterling leg.”

   •  The USD regains positive traction and helps reverse an early dip.
   •  Risk-off mood/sliding US bond yields kept a lid on further gains.
   •  Traders now eye US monthly retail sales data for some impetus.

The USD/JPY pair reversed an early European session dip to 113.55 area and is currently placed at the higher end of its daily trading range ahead of the US monthly retail sales. 

The US Dollar stood tall near 18-month tops, around mid-97.00s, and was seen as one of the key factors driving the pair higher, albeit a combination of negative forces kept a lid on any runaway rally. 

Fears of slowing global growth reemerged on Friday following the disappointing release of Chinese macro data and dismal Euro-zone PMI prints for December and dampened investors' appetite for riskier assets.

The risk-off mood was evident from a sea of red across global equity markets, further reinforced by the ongoing slide in the US Treasury bond yields, and underpinned the Japanese Yen's safe-haven demand. 

Adding to this, uncertainty over the Fed's rate hike path in 2019, especially after the US President Donald Trump latest criticism on Thursday further collaborated towards capping gains.

Next in focus will be the US economic docket, featuring the release of the monthly retail sales data, which will be looked upon for some fresh trading impetus on the last trading day of the week. 

Technical outlook

Valeria Bednarik, FXStreet's own American Chief Analyst writes: “The USD/JPY pair 4 hours chart shows that the price continues developing well above its 100 and 200 SMA which run parallel around 113.20. To the upside, a recovery past 114.00 could send the pair up to the 114.40/50 price zone.”
 

   •  Having failed to move back above 100-hour SMA, the pair met with some aggressive supply and tumbled to sub-1.1300 level, or fresh monthly lows, on dismal Euro-zone PMI prints.

   •  The steep intraday decline dragged technical indicators on the 1-hourly chart into oversold territory and turned out to be the only factor limiting further downside, at least for the time being.
 

EUR/USD 1-hourly chart

   •  Meanwhile, the pair already seems to have confirmed a near-term bearish breakthrough an ascending trend-line support, extending from yearly lows through lows set on Nov. 28 and Dec. 11.

   •  Moreover, technical indicators on the 4-hourly chart have just started gaining negative momentum and hence, the pair remains vulnerable to head back towards retesting yearly lows.

4-hourly chart

EUR/USD

Overview:
    Today Last Price: 1.1296
    Today Daily change: -68 pips
    Today Daily change %: -0.598%
    Today Daily Open: 1.1364
Trends:
    Previous Daily SMA20: 1.1365
    Previous Daily SMA50: 1.1403
    Previous Daily SMA100: 1.1501
    Previous Daily SMA200: 1.1723
Levels:
    Previous Daily High: 1.1394
    Previous Daily Low: 1.1331
    Previous Weekly High: 1.1424
    Previous Weekly Low: 1.1311
    Previous Monthly High: 1.15
    Previous Monthly Low: 1.1216
    Previous Daily Fibonacci 38.2%: 1.1355
    Previous Daily Fibonacci 61.8%: 1.137
    Previous Daily Pivot Point S1: 1.1332
    Previous Daily Pivot Point S2: 1.13
    Previous Daily Pivot Point S3: 1.127
    Previous Daily Pivot Point R1: 1.1395
    Previous Daily Pivot Point R2: 1.1426
    Previous Daily Pivot Point R3: 1.1457

 

Analysts at TD Securities point out that the flash December PMIs of Eurozone showed declining activity in both France and Germany.

Key Quotes

“In France, the effects of the "gilets jaunes" protests was clear in the services PMI, which fell into contractionary territory, falling over 5pts to 49.6 while the Manufacturing index slipped just over a point to 49.7.”

“The decline in the manufacturing sector was pinned on the auto sector. Germany's Flash PMIs for September showed slower activity in both manufacturing and services. The Manufacturing PMI confirmed our slight downside lean, falling a few ticks to 51.5, largely reflecting lower stocks and easing supply chain pressures. New export business fell in part on a drop in sales to China. The auto sector continued to exert a drag as well.”

UK PM Theresa May’s spokeswoman, Alison Donnelly, briefing reporters in London this Friday, said that the EU summit is just the start of the process on the backstop and there is a shared determination to find a way through.

Key quotes:

   •  Confident to get solutions needed on Brexit.
   •  May wants a vote as soon as possible in January.

   •  A sudden fall in the shared currency helped gain strong traction.
   •  The prevalent risk-off mood helped offset weaker US bond yields.
   •  Traders now eye the US monthly retails sales data for fresh impetus.

 
The US Dollar regained positive traction on the last trading day of the week and is currently placed at 18-month tops, around mid-97.00s.

The USD demand picked up pace since the early European trading session and turned out to be one of the key beneficiaries of dismal Euro-zone PMI-led steep fall in the shared currency.

This coupled with a fresh wave of global risk-aversion trade, triggered by weaker than expected Chinese macro data, further underpinned the greenback’s relative safe-haven status and remained supportive of the strong intraday up-move.

Meanwhile, the ongoing slide in the US Treasury bond yields, amid uncertainty over the Fed’s rate hike path in 2019, did little to hinder the ongoing positive momentum but might now contribute towards keeping gains in check.

The index now seems to have entered a bullish consolidation phase as market participants now look forward to the US economic docket, highlighting the release of monthly retail sales data for some fresh bullish impetus.

Technical levels to watch

Dollar Index Spot

Overview:
    Today Last Price: 97.52
    Today Daily change: 44 pips
    Today Daily change %: 0.453%
    Today Daily Open: 97.08
Trends:
    Previous Daily SMA20: 96.9
    Previous Daily SMA50: 96.49
    Previous Daily SMA100: 95.82
    Previous Daily SMA200: 94.21
Levels:
    Previous Daily High: 97.3
    Previous Daily Low: 96.88
    Previous Weekly High: 97.21
    Previous Weekly Low: 96.37
    Previous Monthly High: 97.7
    Previous Monthly Low: 95.68
    Previous Daily Fibonacci 38.2%: 97.14
    Previous Daily Fibonacci 61.8%: 97.04
    Previous Daily Pivot Point S1: 96.87
    Previous Daily Pivot Point S2: 96.67
    Previous Daily Pivot Point S3: 96.45
    Previous Daily Pivot Point R1: 97.29
    Previous Daily Pivot Point R2: 97.51
    Previous Daily Pivot Point R3: 97.71

 

Reuters quotes the Italian government officials, citing that Italy’s PM Conte and Germany’s Chancellor Merkel met on Friday and discussed the much-debated 2019 Rome budget.

The officials, however, did not offer further details of the meeting.

Italian officials said Conte is also trying to arrange other meetings, including with Dutch Prime Minister Mark Rutte.

Russia's central bank raised the interest rate from 7.50% to 7.75%. Markets had not anticipated the Moscow-based institution led by Governor Elvira Nabiullina to change rates. 

USD/RUB trades a tad lower after the announcement, at around 66.30.

The Russian economy suffers from sanctions and falling oil prices. 

The increase in the interest rate serves to support the Russian Rouble amid the global headwinds. On the other hand, An increase in Value Added Tax (VAT) expected in January lifts inflation expectations. Annual inflation stood at 3.8% as of November, close to the 4% upper limit set by the central bank.

In an interview with the Italian newspaper Il Fatto Quotidiano, the country’s Deputy Prime Minister Luigi Di Maio said that his government was pleased that the budget deficit target could be lowered, Reuters reports.

Key Headlines:

“We are happy to be able to lower the deficit.” 

Asked about the economic growth target of 1.5 percent set for 2019, Di Maio said, “the only reason to come down from 1.5 percent could be linked to the slowdown in the last part of (this) year, caused mainly by exports.”

According to the latest headlines floating on the wires, China is said to lift retaliatory tariffs on US cars from 1 January. Tariffs will fall back to 15% from 40% currently.

Update:

China Finance Ministry confirmed to suspend 25% tariffs on 144 US vehicle and auto part items, 5% tariffs on 67 auto items, and hopes US-China can speed up talks to remove all additional tariffs on each other's goods.

  • Upside capped amid notable USD demand, supply glut worries and China slowdown fears.
  • Attention turns towards the US retail sales report and rigs count data for fresh direction.

The recovery attempts in WTI (oil futures on NYMEX) failed once again near 52.70 levels, sending the rates back below the midpoint of the 52 handle, as the bears fight back control amid unabated broad US dollar demand and looming China slowdown concerns.

The greenback extends its move higher versus its main competitors, reaching fresh monthly tops near 97.60 levels, as sentiment sours across the European markets following dismal Euro area flash manufacturing PMI readings. Downbeat PMI reports from the Euroland added to global growth concerns, especially after China reported a sharp drop in its retail sales and industrial figures. Note that China is the world’s No.2 oil consumer.

Moreover, mounting oversupply concerns coupled with doubts whether the OPEC output cuts would be able to stabilize the oil markets continue to remain a drag on the prices. Meanwhile, the focus now shifts towards the US drilling sector activity report that will be published by Bakers and Hughes oilfield Services Company for further trading impetus.

WTI Technical Levels

WTI

Overview:
    Today Last Price: 52.1
    Today Daily change: 8.0 pips
    Today Daily change %: 0.154%
    Today Daily Open: 52.02
Trends:
    Previous Daily SMA20: 52.32
    Previous Daily SMA50: 59.36
    Previous Daily SMA100: 64.89
    Previous Daily SMA200: 66.91
Levels:
    Previous Daily High: 52.06
    Previous Daily Low: 51.89
    Previous Weekly High: 54.2
    Previous Weekly Low: 50.57
    Previous Monthly High: 63.92
    Previous Monthly Low: 49.64
    Previous Daily Fibonacci 38.2%: 52
    Previous Daily Fibonacci 61.8%: 51.95
    Previous Daily Pivot Point S1: 51.92
    Previous Daily Pivot Point S2: 51.82
    Previous Daily Pivot Point S3: 51.75
    Previous Daily Pivot Point R1: 52.09
    Previous Daily Pivot Point R2: 52.16
    Previous Daily Pivot Point R3: 52.26

 

Adding to his earlier comments, the European Central Bank (ECB) Governing Council member Ewald Nowotny was further noted saying that risks to growth are not so significant that we would change our monetary policy orientations. 

Additional Quotes:

   •  Market expectations of delayed rate hike worrying.
   •  The market assumes a weaker economy, but ECB forecasts don't.

According to Bert Colijn, senior economist at ING, the decline in Eurozone PMI from 52.7 to 51.3 suggests the revival of GDP growth may not have happened at all.

Key Quotes

“Today, the PMI sends a message that is more along the lines of “continuing confidence with alarm bells ringing”.”

“GDP growth in the third quarter slowed to 0.2% with expectations of a bounce back straight after. Even though the PMI is still signalling output growth, the question is whether growth has even picked up at all despite one-offs affecting the third quarter reading.”

“New orders barely grew in December and export orders showed the sharpest contraction seen since the start of the indicator. The global economic environment is hindering Eurozone output, but internal factors like the French protests also played a role in the weak December reading.”

“Today’s PMI confirms an already slow growth environment and with plenty of downside risks possibly materialising before summer next year, doubts about the forward guidance are likely to increase.”

 

   •  The pair extended overnight rejection slide from 100-day SMA and dropped to fresh weekly lows, around the 128.00 handle on dismal Euro-zone PMI prints.

   •  The mentioned hurdle coincides with the top end of a broader trading range, held over the past one month or so and forming a rectangle on the daily chart.

EUR/JPY daily chart

   •  Adding to this, a pickup in the JPY's safe-haven demand, amid the prevalent risk-off mood, further collaborated to the pair's sharp intraday downfall. 

   •  A decisive breakthrough 100-hour SMA was seen as a key trigger for bearish traders, though oversold conditions on the 1-hourly chart might help limit losses.

1-hourly chart

   •  Meanwhile, technical indicators on 4-hourly/daily charts have just started gaining negative momentum and thus, increase prospects for an extension of the ongoing slide. 

   •  Hence, a follow-through weakness, towards challenging the one-month-old trading range, around the 127.65-60 region, now looks a distinct possibility.

EUR/JPY

Overview:
    Today Last Price: 128.18
    Today Daily change: -91 pips
    Today Daily change %: -0.705%
    Today Daily Open: 129.09
Trends:
    Previous Daily SMA20: 128.62
    Previous Daily SMA50: 128.86
    Previous Daily SMA100: 129.21
    Previous Daily SMA200: 129.73
Levels:
    Previous Daily High: 129.27
    Previous Daily Low: 128.58
    Previous Weekly High: 129.3
    Previous Weekly Low: 127.61
    Previous Monthly High: 130.16
    Previous Monthly Low: 127.5
    Previous Daily Fibonacci 38.2%: 129.01
    Previous Daily Fibonacci 61.8%: 128.84
    Previous Daily Pivot Point S1: 128.69
    Previous Daily Pivot Point S2: 128.29
    Previous Daily Pivot Point S3: 128
    Previous Daily Pivot Point R1: 129.38
    Previous Daily Pivot Point R2: 129.67
    Previous Daily Pivot Point R3: 130.08

 

Reuters quotes Japanese government sources making estimates for the 2019/20 fiscal budget draft.

Key Details:

Japan fiscal 2019/20 budget draft to total around JPY 101.5 tln.

2019/20 new debt issuance to total around jpy32.7 tln.

Analysts at Standard Chartered point out that China’s November data was quite disappointing as industrial production (IP) and retail sales growth fell considerably short of market expectations, at 5.4% y/y and 8.1% y/y, respectively, versus consensus forecasts of 5.9% and 8.8%.

Key Quotes

“Monthly fixed asset investment (FAI) growth stayed flat at c.8% y/y in November, recovering only moderately after slowing to 3% in July. Housing sales fell for the third consecutive month in November by 3.7% y/y (Figure 1). Data released earlier this week also suggests inflation, trade and credit growth remain on a moderating trend.”

“The economy is likely still going through a soft patch, with continued pressure from slow credit growth, a weak housing market and uncertain US-China trade negotiations. However, the downside risk to the economy remains contained. Beijing has reprioritised maintaining reasonable growth over deleveraging. We expect the government to increase the general budget deficit to 3.0% of GDP in 2019 from 2.6% in 2018, and use flexible local government special bond issuance to increase or decrease fiscal stimulus as needed.”

Reuters reports the following comments by the European Central Bank (ECB) Vice President Luis de Guindos, as delivered a speech in Frankfurt.

ECB needs to be cautious.

Markets are well-aligned with our policy.

We have to keep our optionality at the maximum level.

The European Central Bank (ECB) Governing Council member Ewald Nowotny speaks about the inflation and growth outlook during his speech in Vienna.

Key Headlines:

Risks to growth are broadly balanced.

Inflation is seen trending in-line with ECB goal.

Core inflation trend is going in the right direction.

Takes a very critical view of buying corporate bonds.

Buying corporate bonds can carry significant risks.

   •  Disappointing EZ PMI prints prompt some aggressive selling.
   •  Investors scale back expectations for an ECB rate hike in 2019.
   •  A follow-through technical selling remains a distinct possibility.

The EUR/USD pair finally broke below the 1.1300 handle and tumbled to fresh monthly lows in a knee-jerk reaction to dismal Euro-zone PMI prints.

According to the flash readings, French PMIs drifted into contraction territory for the first time in over two-years and German manufacturing PMI dropped to 33-months in December. Adding to the disappointment, the composite Euro-zone PMI fell to a fresh 49-month low level of 51.3 in December.

Today's data reaffirmed a dovish shift by the ECB President Mario Draghi during the post-meeting press conference on Thursday, forcing investors to scale back expectations for a rate hike next year, and prompted some aggressive selling around the shared currency. 

According to the Euro-zone money market futures, investors are now pricing in roughly 60% probability for the ECB to hike rates next year, which marks a heavy drop from around 75% probability seen yesterday after the ECB meeting. 

With today's fall, the pair finally seems to have confirmed a near-term bearish breakdown and hence, a follow-through weakness, led by some fresh technical selling, remains a distinct possibility.

Technical levels to watch

EUR/USD

Overview:
    Today Last Price: 1.1292
    Today Daily change: -72 pips
    Today Daily change %: -0.634%
    Today Daily Open: 1.1364
Trends:
    Previous Daily SMA20: 1.1365
    Previous Daily SMA50: 1.1403
    Previous Daily SMA100: 1.1501
    Previous Daily SMA200: 1.1723
Levels:
    Previous Daily High: 1.1394
    Previous Daily Low: 1.1331
    Previous Weekly High: 1.1424
    Previous Weekly Low: 1.1311
    Previous Monthly High: 1.15
    Previous Monthly Low: 1.1216
    Previous Daily Fibonacci 38.2%: 1.1355
    Previous Daily Fibonacci 61.8%: 1.137
    Previous Daily Pivot Point S1: 1.1332
    Previous Daily Pivot Point S2: 1.13
    Previous Daily Pivot Point S3: 1.127
    Previous Daily Pivot Point R1: 1.1395
    Previous Daily Pivot Point R2: 1.1426
    Previous Daily Pivot Point R3: 1.1457

 

The European Central Bank (ECB) Governing Council member Vasiliauskas is on the wires now, via Reuters, with the key comments found below.

Euro area risks are mixed, warrant monitoring.

Risks tilted to negative side.

In the end, there was a "unanimous assessment" yesterday on language.

Risks are changing rapidly.

Need more time to figure out what's happening.

  • Fresh USD buying, Brexit backstop uncertainty drags the Cable lower.
  • A breach of hourly 100-SMA at 1.2602 opens the floor for further downside.
  • USD bulls await US retail sales data for further trading momentum.

The GBP/USD pair came under heavy selling pressure on a breach of the hourly 100-SMA support placed at 1.2602 and now prints fresh two-day lows at 1.2570, as the bears regain poise amid resurgent US dollar demand across its main competitors.

The bid tone around the US dollar keeps growing bigger in the European session, largely on the back of a sharp fall in the EUR/USD pair to the 1.13 handle after weak French, Eurozone and German manufacturing PMI readings that confirm ECB”s concerns on the economic outlook.

Further, looming uncertainty over the Irish border backstop and the latest comments by the UK PM Theresa May’s Deputy David Lidington collaborates to the bearish tone around the Cable.

In the day ahead, the bulls could be rescued only by the disappointing US retail sales data due later in the NA session at 1330 GMT. Until then, the USD dynamics and broader market sentiment will continue to drive the GBP/USD price-action.

GBP/USD Technical Levels

GBP/USD

Overview:
    Today Last Price: 1.2574
    Today Daily change: -91 pips
    Today Daily change %: -0.719%
    Today Daily Open: 1.2665
Trends:
    Previous Daily SMA20: 1.2746
    Previous Daily SMA50: 1.29
    Previous Daily SMA100: 1.2937
    Previous Daily SMA200: 1.3263
Levels:
    Previous Daily High: 1.2688
    Previous Daily Low: 1.2593
    Previous Weekly High: 1.284
    Previous Weekly Low: 1.2659
    Previous Monthly High: 1.3176
    Previous Monthly Low: 1.2723
    Previous Daily Fibonacci 38.2%: 1.2629
    Previous Daily Fibonacci 61.8%: 1.2651
    Previous Daily Pivot Point S1: 1.2609
    Previous Daily Pivot Point S2: 1.2554
    Previous Daily Pivot Point S3: 1.2515
    Previous Daily Pivot Point R1: 1.2704
    Previous Daily Pivot Point R2: 1.2743
    Previous Daily Pivot Point R3: 1.2798

 

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© 2018 SVS Securities - Todos los derechos reservados.

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