Weekly Outlook: 2015, November 29 - December 06

Is Selling EUR/USD Still Attractive At Current Levels? - Credit Agricole

• "Looking ahead, we believe it is unlikely that the ECB will exceed elevated easing expectations next week. It appears that markets priced in both an extension of QE and reduction of the deposit rate by more than 10bp."
• "As a bigger than expected cut would most likely increase expectations of the ECB having reached the lower bound in rates, a sell the fact reaction may trigger position squaring-related EUR upside later next week. This is especially true when considering that speculative positioning as indicated by IMM data remains close to elevated territory."
• "All of the above stands in contrast to the USD. By now it is widespread consensus that the Fed will tighten monetary policy next month, in particular as risk sentiment and inflation expectations as measured by 5y forward breakeven rates have been well supported, irrespective of rising Fed rate expectations. Nevertheless, it must be noted too that the Fed is unlikely welcoming a further appreciating USD from the current levels. Unless growth momentum accelerates from the current levels an even stronger currency may start to dampen price developments more considerably."
• "All of the above suggests that the USD is facing rising downside correction risk in the weeks to come. As such we advise against selling pair such as EUR/USD around the current levels. If anything we believe that better levels closer to 1.08-1.10 can be reached before new shorts should be considered."

the source

US Dollar Forecast – US Rate Speculation Versus a Tumultuous World of Fundamentals
The week ahead is the antithesis of what we have come to expect from December.

Australian Dollar Forecast – Australian Dollar Faces Perfect Storm of Key Event Risk Ahead
The Australian Dollar faces a perfect storm of volatility in the week ahead as high-profile event risk on the homegrown and the external fronts looms ahead.

Gold Forecast – How Much Air is Left in Gold Prices?
The past six weeks have been brutal for Gold, and this was really sparked by rate hike expectations out of the Federal Reserve, as the top in Gold meshes well with the bottom in the US Dollar (both taking place on October 15th).

more...

Forex Weekly Outlook Nov 30-Dec 4

The US dollar managed to gain some ground in the Thanksgiving week. A very busy week awaits us in the first week of the last month: 3 rate decisions with the ECB gaining a lot of traction, a full buildup to the US Non-Farm Payrolls as well as a testimony from Fed Chair Janet Yellen. Here is an outlook for these key events and more.

The U.S. economy released some positive figures such as a better growth rate, showing an annual GDP gain of 2.1% in the third quarter. Furthermore, US Jobless claims fell 12,000 last week to 260,000, beating forecast for a 273,000 reading. Not all data has been great, but it seems good enough for the Fed to proceed with a rate hike on December 16. In the euro-zone, we heard some ideas for the ECB decision, that weighed on the euro. The stabilizing of oil prices only partially helped the loonie and the Aussie only partially enjoyed the lack of appetite for a rate hike.

1. Chinese Caixin Manufacturing PMI: Tuesday, 1:45. This independent measure from the world’s No. 2 economy always shakes the A$ but also impacts the whole world, especially after the stock market crash in August. A repeat of 48.3 points is expected for November. This reflects contraction.
2. Australian rate decision: Tuesday, 3:30. The Reserve Bank of Australia kept the cash rate at 2% for the sixth month in a row in November, but left the door open to another cut in the next few months. RBA governor Glenn Stevens said that the slow pace of inflation might allow further easing of policy. The decision was in line with market forecast.
3. Mark Carney speaks: Tuesday, 9:00. Bank of England governor Mark Carney will speak about the Financial Stability Report and UK Bank Stress Testing, in London. He said that UK interest rates are expected to remain low “for some time” and that rates should remain at 0.5% until mid-2016 at the earliest. Meanwhile, the central bank monitoring groups of households to find out what impact any rate hike would have.
4. Canadian GDP: Tuesday, 13:30. Canada’s gross domestic product expanded for a third month in a row in August, but at a slower than expected pace. GDP rose 0.1% in August from July, in line with forecasts. Economists said the August rise might contribute to a 2.5% positive growth rate in the third quarter. The August gain was driven by solid growth in manufacturing and retail sales, both rising 0.6% July, as well as a continued improvement in energy and mining output. GDP is expected to rise 0.1% in September.
5. US ISM Manufacturing PMI: Tuesday, 15:00. The Institute for Supply Management manufacturing index declined to 50.1 in October, the lowest level since May 2013, after posting 50.2 in September. The index hangs close to the 50 point mark between expansion and contraction. The strength of the dollar as well as low oil prices weigh on manufacturers. The new orders sub-index increased to 52.9 from 50.1 in September, but export orders continued to contract. The employment index contracted in October for the first time in six months, hitting its lowest level since August 2009, suggesting more weakness in factory payrolls. Manufacturing PMI index is expected to post 50.6 in November.
6. Australian GDP: Wednesday, 0:30. Australia expanded at the slowest pace in two years amid a sharp fall in export volumes. GDP gained 0.2% following solid 0.9% rise in the previous quarter. Analysts expected a 0.4% rise. Government and household consumption showed biggest gains while Exports of goods and services fell 3.3%. The Reserve Bank of Australia sees growth between 2.0 and 3.0% to June 2016. A growth rate of 0.7% is expected this time.
7. US ADP Non-Farm Payrolls: Wednesday, 13:15. U.S. private sector employment increased more than expected in October, a seasonally adjusted 182,000. The reading boosted optimism over the health of the economy and the growing chances for a U.S. interest rate hike this year. The economy created 190,000 jobs in September, downwardly revised from a previously reported increase of 200,000. Despite the volatility of this report, it does give guidance on private-sector hiring. ADP estimate for November is expected to show a job gain of 191,000.
8. Janet Yellen speaks: Wednesday, 13:30 and 17:25 at a conference and an official testimony on Thursday at 15:00. Federal Reserve Chair Janet Yellen recently suggested that a December interest rate increase is still on the table. Yellen said that the committee has made no decision yet but that December rate hike was still a “live possibility”. In her public appearances, the last before the December 16th Fed decision, the Fed chief can cement a rate hike and could reiterate that the next moves will be extremely gradual, something that the markets may have already been considering. She may also have early access to the NFP data on Friday, and perhaps we could interpret her tone to what is expecting us.
9. Eurozone rate decision: Thursday, 12:45, press conference at 13:30. European Central Bank president Mario Draghi has hinted at the possibility of further QE in December. The central banker explained that the ECB would continue to purchase £60bn ($92bn) a month in assets as part of its QE program, but that amount might increase. Draghi said that the asset-purchase plans are proceeding smoothly and continue to have a favorable impact in the market. Draghi also stated that the new macro-economic projections will be read by the ECB meeting in December and would enable the committee to undertake a review of its policy stance. There is speculation about a two-tier cut in the deposit rate, but the details are unclear. According to a recent poll, expectations stand at a 10bp cut in the deposit rate to -0.30% and an increase of €15 billion in QE, from ָָ€60 to €75 billion per month. There is potential for a surprise in the interest rate, the path of least resistance. Here is the full ECB preview: Short euro and long bunds opportunities.
10. US Unemployment Claims: Thursday, 13:30. The number of Americans filing initial claims for unemployment benefits declined more than expected approaching to near 42-year lows as labor market conditions continue to tighten. The number of claims fell 12,000 to a seasonally adjusted 260,000 for the week ended Nov. 21. Economists expected a higher reading of 272,000. The four-week moving average of claims was unchanged at 271,000 last week. Continuing claims increased 34,000 to 2.21 million in the week ended Nov. 14. The four-week moving average of the so-called continuing claims rose 15,250 to 2.18 million. The number of weekly claims is expected to reach 269,000 this week.
11. US ISM Non-Manufacturing PMI: Thursday, 15:00. Service sector activity in the U.S. expanded at a faster rate than expected in October, raising optimism over the health of the economy and supporting a rate hike call in the coming months. The index rose to 59.1 points in October from 56.9 in September beating forecasts for 56.6. 14 non-manufacturing industries reported growth in October. Non-Manufacturing PMI is expected to reach 58.1 in November. This serves as a hint for the NFP.
12. US Non-Farm Payrolls: Friday, 13:30. Nonfarm payrolls increased 271,000 in October, rising sharply from 137,000 registered in August and September. The unemployment rate dropped to 5.0%. Average hourly earnings, jumped 9 cents, showing a monthly gain of 0.6% and an annualized increase of 2.5%. The average work week remained at 34.5 hours. The labor force participation rate reached 62.4%, though the decline in the total labor force slowed a bit. The Federal Reserve monitors the monthly number watching for clues about the strength of job creation and inflationary pressures, particularly from wage growth. A job gain of 201,000 is expected with a 5% unemployment rate. Wages are expected to rise by 0.2% this time.
13. Canadian jobs report: Friday, 13:30. Canada enjoyed a gain of 44.4K jobs in October, much better than expected. This time, a small drop of 0.7K is expected. The unemployment rate is predicted to remain unchanged at 7%. Canada is showing signs of stability despite the fall of oil prices. Is it well based?

the source

EUR/USD Forecast Nov. 30 – Dec. 4

EUR/USD dipped to new lows but also showed hesitation, closing another week in the red. The ECB decision in which new measures are expected, is undoubtedly the big event of the week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The ECB is warming its engines for the big decision, with a report about a two tier deposit rate as a possibility. Speculation is mounting about the decision, and so is the question: is ECB action already priced in. Data is looking better in Germany, with upbeat PMIs and a surprising rise in business confidence.

1. German CPI: Monday: the states report throughout the day with the all-German figure at 13:00. In October, prices remained unchanged m/m, better than expected. The preliminary German number for November released now feeds into the all-European number and is closely watched by the ECB.
2. Manufacturing PMIs: Tuesday: 8:15 for Spain, 8:45 for Italy, final French number at 8:50, final German figure at 8:55 and the final all-European figure by Markit is released at 9:00. Spain, the euro-zone’s fourth largest economy, saw modest growth in the manufacturing sector in October, 51.3 points. The 50 point mark separates growth from contraction. Italy, the third largest, saw 54.1 points. According to the preliminary release for November, France had modest growth at 50.8 points and Germany saw a more upbeat level of 52.6 points while the euro-zone enjoyed 52.8 points. The last three numbers will probably be confirmed now.
3. German Unemployment Change: Tuesday, 8:55. The locomotive of the euro-area saw the number of unemployed drop by 5K jobs. The good news will likely continue.
4. Unemployment Rate: Tuesday, 10:00. The unemployment in the euro-zone is still high at 10.8%, but continues improving and is off the highs. Did it continue sliding in October?
5. German Retail Sales: Wednesday, 7:00. The volume of retail sales remained flat in Germany during the month of September, falling short of expectations for the second consecutive time.
6. Spanish Unemployment Change: Wednesday, 8:00. Despite improvements, Spain still suffers a high unemployment rate. This seasonal figure rose by 82.3K in October and the fresh figure for November comes at a sensitive time: just several weeks before the general elections.
7. CPI: Wednesday, 10:00. Inflation figures surprised to the upside in October, with the final headline inflation ticking up to 0.1% and core inflation rising to 1.1% y/y. This contrasts worries from Draghi. The preliminary numbers for November come just one day before Draghi speaks out.
8. Services PMIs: Thursday, 8:15 for Spain, 8:45 for Italy, final French number at 8:50, final German figure at 8:55 and the final all-European figure by Markit is released at 9:00.
9. Retail Sales: Thursday, 10:00. While the figure is released after the German and French ones, it is still watched. After a slip of 0.1% in September, a rise of 0.2% is on the cards for October.
10. ECB decision: Thursday, 12:45, press conference at 13:30. European Central Bank president Mario Draghi has hinted at the possibility of further QE in December. The central banker explained that the ECB would continue to purchase £60bn ($92bn) a month in assets as part of its QE program, but that amount might increase. Draghi said that the asset-purchase plans are proceeding smoothly and continue to have a favorable impact in the market. Draghi also stated that the new macro-economic projections will be read by the ECB meeting in December and would enable the committee to undertake a review of its policy stance. There is speculation about a two-tier cut in the deposit rate, but the details are unclear. According to a recent poll, expectations stand at a 10bp cut in the deposit rate to -0.30% and an increase of €15 billion in QE, from ָָ€60 to €75 billion per month. There is potential for a surprise in the interest rate, the path of least resistance. Here is the full ECB preview: Short euro and long bunds opportunities.
11. German Factory Orders: Friday, 7:00. Germany’s factory orders disappointed in September with a drop of 1.7%. A rebound of 1.3% is predicted in this volatile figure.
12. Retail PMI: Friday, 9:10. This measure of activity in the retail sector has been steady at 51.3 points in October, reflecting slow growth. A similar number could be seen now.

the source