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Fx pairs were relatively quiet on Friday with the main event being the UK’s preliminary GDP data. Although soft, growing at 0.7% the fact that GDP in the UK continues to expand was seen as s positive for Sterling. The Sterling pairs were mostly mixed on the GDP news release.
Germany’s Gfk consumer confidence saw a modest rise to 8.5, beating expectations of a reading of 8.1. Many analysts are of the view that the Eurozone and especially German data have hit the bottom and could likely start showing improved fundamentals. Today’s Ifo business climate in Germany will perhaps see if this view is justified or not, ahead of the Eurozone inflation readings later in the week.
The ECB announced the results of the Asset Quality Review or bank stress tests on Sunday. The results were widely in-line with expectations with 25 out of 130 banks failing the test of which 12 had already taken remedial measures to shore up on their capital reserves. The Euro opened today’s session higher boosted by the results of the stress tests.
Economic data for today is relatively light with the exception of the German business climate and flash services PMI and pending home sales data from the US.
Fundamentals Recap – October 24, 2014
- Italian retail sales m/m declines -0.1% below estimates of 0.2% increase
- UK Preliminary GDP q/q meets expectations, growing 0.7%
- US New home sales data rises lesser than expected at 467k v/s estimates of 473k
Fundamentals – October 27, 2014
- German Ifo business climate to be soft at 104.6 v/s 104.7 last month
- Eurozone private lending expected to decline by -1.3% after declining -1.5% last month
- US flash services PMI to be softer at 57.9 v/s 58.9 last month
- US pending home sales is expected to increase 1.1% after declining by -1% last month
EURUSD Daily Pivots
The opened the Asian session higher, boosted by the Eurozone bank’s stress tests results. Technically though, the current rally we see looks to be a retest of the break out from the rising trend line. If the rally caps near 1.27165, we can expect to see the pair resume its declines. To the downside, support comes in at 1.2635 followed by a decline close to 1.2508. If the resistance near 1.27165 gives way, we can see EURUSD target the previous range breakout zone near 1.27395.
USDJPY Daily Pivots
USDJPY is finding it difficult to break above the previous highs as seen by large number of candles, consolidating near the top. The view is clear when applying the channels as we can see USDJPY finding resistance near the upper channel line. We can expect USDJPY to decline towards previous resistance level at 107.365 which if turning to support could see USDJPY push higher. Alternatively, if USDJPY does break out of the bullish flag it is currently forming, we can expect to see the next upside resistance coming at 108.5 – 109 levels.
GBPUSD Daily Pivots
GBPUSD has managed to break higher especially during the last few days of the previous week. We currently see an inverted head and shoulders pattern, which immediately puts the price objective towards 1.648. The inverted head and shoulders gains importance as it forms after months of continued decline in GBPUSD. Of course, the key risk being the neckline level at 1.615 – 1.618 needs to be cleared in order for the pattern to be validated.
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